Shang Gong Group Co., Ltd.Semi-annual Report 2019
IMPORTANT NOTES
1. The board of directors, the board of supervisors, directors, supervisors and senior executivesof the Company undertake that the content of this semi-annual report is true, accurate and complete,and contains no false records, misleading statements, or major omissions, and will assume joint andseveral legal liabilities arising therefrom.
2. All the directors of Shang Gong Group Co., Ltd. attended the meeting of the board ofdirectors.
3. This semi-annual report is not audited.
4. Zhang Min, Chairman of the Company, Zhang Jianrong, the principal in charge of theaccounting, and Zhao Lixin, Chief of Accounting Affairs, declare and guarantee the veracity,accuracy and integrity of the financial report in the semi-annual report.
5. Plan of profit distribution or transfer of reserves deliberated by the board
The profit distribution cannot be made in the report period, neither the transferring of capital reservesinto share capital.
6. Warning statement of forward-looking statements
The Company’s future plan, development strategy and other forward-looking statements in the reportdo not constitute any material commitment of the Company to investors. Investors and relevant personsshall be sufficiently mindful of risks, and undertake the difference in plans, predictions and commitments.
7. There was no occupation of fund of the Company occurred for non-operating use by holdingshareholder and its related parties.
8. There was no external guarantee against the rules and regulations of the Company.
9. The Company has described in detail the risks faced by the Company in this report. Fordetails see “Discussion and Analysis on Business Operation” and other relevant chapters in thisreport.
10. This report is prepared in both Chinese and English. In the case of any inconsistentunderstanding between the Chinese version and the English version, the Chinese version shallprevail.
TABLE OF CONTENTS
Chapter 1 Definition ...... 4
Chapter 2 Company Profile and Main Financial Index ...... 4
Chapter 3 Summary of Company Business ...... 6
Chapter 4 Discussion and Analysis on the Business Operation ...... 8
Chapter 5 Important Matters ...... 15
Chapter 6 Changes in Common Shares and Shareholders ...... 19
Chapter 7 Preferred Stock ...... 20
Chapter 8 Directors, Supervisors and Senior Executives ...... 20
Chapter 9 Corporate Bonds ...... 21
Chapter 10 Financial Report ...... 21
Chapter 11 Documents for Reference ...... 104
Chapter 1 Definition
1. As used in this report, the following terms have the following meanings unless the context requiresotherwises:
| Definition of common terms | ||
| ShangGong Group, SGG, the Company | refer to | Shang Gong Group Co., Ltd. |
| PKFR | refers to | Shanghai Puke Flyingman Investment Co., Ltd |
| Pudong SASAC | refers to | State-owned Assets Supervision and Administration Commission of Shanghai Pudong New Aear People’s Government |
| DA AG | refers to | Dürkopp Adler AG. In July 2018, DAP Industrial AG completed the acquisition of all minority shareholders' equity of DA AG, and absorbed DA AG, and changed its name to Dürkopp Adler AG after the merger was completed. |
| PFAFF GmbH | refers to | PFAFF Industriesystemeund Maschinen GmbH |
| KSL | refers to | PFAFF Industriesystemeund Maschinen GmbH Zweigniederlassung KSL |
| Stoll KG, STOLL | refers to | H. Stoll AG & Co. KG |
| DAP Branch | refers to | Shang Gong Group Co., Ltd. Industrial Sewing Machine Branch |
| Butterfly Branch | refers to | Shang Gong Group Co., Ltd. Shanghai Butterfly Sewing Machine Branch |
| DAMSH | refers to | Dürkopp Adler Industrial Manufaturing (Shanghai) Co., Ltd. |
| PIZ | refers to | PFAFF Industrial Sewing Machine (Zhangjiagang) Co., Ltd. |
| Richpeace, SG Richpeace | refers to | TIANJIN RICHPEACE AI CO., LIMITED |
| SGGEMSY | refers to | Zhejiang ShangGong GEMSY CO., LTD. |
| SHENSY | refers to | Shanghai Shensy Enterprise Development Co., Ltd. |
| SG Zhejiang | refers to | ShangGong Sewing Machine (Zhejiang) Co., Ltd. |
| Report period, reporting period | refers to | From 1st January 2018 to 31st December 2018 |
2. In this report, the unit of the amount is expressed in RMB Yuan unless otherwise specified.
Chapter 2 Company Profile and Main Financial Index
1. Company information
| Company name in Chinese | 上工申贝（集团）股份有限公司 |
| Abbreviation of the Company name in Chinese | 上工申贝 |
| Compay name in English | Shang Gong Group Co., Ltd. |
| Abbreviation of the Company name in English | ShangGong Group |
| Legal representative | Zhang Min |
2. Contact information
| Secretary of Board of Directors | Representative of Securities Affairs | |
| Name | Zhao Lixin | Shen Lijie |
| Office address | No. 1566 New Jinqiao Road, Pudong New Aear, Shanghai | No. 1566 New Jinqiao Road, Pudong New Aear, Shanghai |
| Tel | 021-68407700 | 021-68407515 |
| Fax | 021-63302939 | 021-63302939 |
| zlx@sgsbgroup.com | shenlj@sgsbgroup.com |
3. Basic situation introduction
| Registered address | Room A-D, 12th Floor, Orient Mansion, No. 1500 Century Avenue, China (Shanghai) Pilot Free Trade Zone |
| Postal code of registered address | 200122 |
| Office address | No. 1566 New Jinqiao Road, Pudong New Aear, Shanghai |
| Postal code of office address | 201206 |
| Company website | www.sgsbgroup.com |
| 600843@sgsbgroup.com |
4. Place for information disclosure and consulting
| The name of the information disclosure media selected by the company | Shanghai Securities News, Hong Kong Commercial Daily |
| The website that publishes the annual report designated by China Securities Regulatory Commission | www.sse.com.cn |
| Lodging address of annual report of the Company | Office of the Company |
5. Corporate stock
| Type | Stock exchange | Stock abbreviation | Stock code |
| A Share | Shanghai Stock Exchange | SGSB | 600843 |
| B Share | Shanghai Stock Exchange | SGBG | 900924 |
6. Other information
Not applicable.
7. Main accounting data and financial index
7.1 Main accounting data
| Six Months Ended June 30, | |||
| 2019 | 2018 | % Change YOY | |
| Operaing income | 1,621,983,029.80 | 1,494,794,413.27 | 8.51 |
| Net profit attributable to shareholders of listed company | 70,652,950.10 | 100,161,346.50 | -29.46 |
| Net profit attributable to shareholders of listed company after deduction of non-recurrent account profits and losses | 43,728,412.11 | 89,370,615.19 | -51.07 |
| Net cash flow from operating activities | -107,010,991.19 | -57,703,154.75 | N/A |
| June 30, 2019 | December 31, 2018 | % Change YOY | |
| Net assets attributable to shareholders of listed company | 2,335,177,718.64 | 2,212,858,250.06 | 5.53 |
| Total assets | 4,240,466,997.22 | 4,144,127,162.05 | 2.32 |
7.2 Main financial index
| Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 | % Change YOY | |
| Basic earnings per share (yuan/share) | 0.1288 | 0.1826 | -29.46 |
| Diluted earning per share (yuan/share) | 0.1288 | 0.1826 | -29.46 |
| Basic earnings per share after deduction of non-recurrent profits and losses (yuan/share) | 0.0797 | 0.1629 | -51.07 |
| Weighted average return on net assets (%) | 3.1427 | 4.5625 | Decrease 1.42 percent point |
| Weighted average return on net assets after deduction of non-recurrent profits and losses (%) | 1.9451 | 4.0710 | Decrease 2.13 percent point |
8. Accounting data differences between domestic and foreign accounting standardsNot applicable.
9. Items and amount of non-recurring profit and loss
| Item | Six Months Ended June 30, 2019 |
| Profits and losses from disposal of non-current assets | -54,610.64 |
| Government subsidies recorded in the current profit and loss | 8,334,412.90 |
| Except effective hedging business relevant to the normal business of the Company, gains and losses from changes in fair value arising from trading financial assets and trading financial liabilities, and investment income from disposal of trading financial assets, trading financial liabilities and available-for-sale financial assets | 30,368,799.38 |
| Profits and losses from external entrusted loans | 1,036,392.23 |
| Other non-operating income and expenditure except the above-said items | -1,819,359.73 |
| Impact on minority interests | -10,941,096.15 |
| Impact on income tax | 26,924,537.99 |
Chapter 3 Summary of Company Business
1. The Company’s main business, business model in the report period and industry situationDuring the reporting period, the Company's main business is the sewing equipment manufacturingindustry and intelligent equipment manufacturing industry. The Company’s business also involves officemachinery, logistics services and trade. The company's main products include sewing, embroidery, cutting,welding and other sewing equipment, robot welding, assembly production lines, program-controlledmechanical processing lines, as well as intelligent storage, automatic transmission devices.
The Company adheres to globalization of business, and implements unified management of sales ofsewing equipment. The Company adopts a gradient-based specialized multi-brand marketing strategy, andconducts gradient division management on production sites throughout Europe and Asia. The Company paysattention to collaborative research and development, and seizes the global high-end market of sewingequipment with leading technology. At the same time, the Company is cultivating the business model of“Shanghai Manufacturing”, which means R&D and marketing in Shanghai while production in Jiangsu,Zhejiang and other provinces.
In recent years, through the implementation of mergers and acquisitions at home and abroad and thereorganization and integration within the Company, with the business philosophy of “market orientation andbenefit first” to manage subsidiaries in a unified manner, the synergy effect has gradually emerged and theinternational business model has achieved good results.
China’s sewing machinery manufacturing industry is a branch of light industry in China. It hasestablished the most complete industrial system in the world, and is capable of manufacturing a full range ofsewing machinery products, including household and industrial sewing machine, embroidery machine andcutting machine, and the related controller, motor ability and spare parts, which satisfies all kinds of socialneeds. However, compared with the advanced in the world, there is still a large gap for China’s sewingmachinery manufacturing industry in independent innovation ability, industrial structure, technology, productand brand quality and other aspects. The whole industry is big but not strong. The development of the worldsewing machinery industry started in the middle of the nineteenth Century in Europe and the United States.After 100 years of development, at present the world sewing machine industry development center has beentransferred to the Asian region like China and Japan, and gradually formed tripartite confrontation patternbetween China, Germany and Japan.
In the first half of 2019, due to the slowdown in global economic growth, the escalation of Sino-UStrade disputes, and the cyclical adjustment of the industry, the production and sales of sewing machinery inChina showed a downward trend, and the pressure for development increased. Foreign trade orders weretransferred to foreign countries relatively quickly. The downstream industries had more shutdowns. Thewait-and-see attitude gradually deepened and the willingness to invest dropped significantly, which directlyled to a rapid decline in the market demand for sewing equipment in the short term. According to thestatistics of China Sewing Machinery Association, the growth rate of the industry’s production in the firsthalf of 2019 slowed down from 11.6% at the end of 2018 to -13.98%, and it still showed a downward trend.The downward pressure on the economy clearly exceeded the industry development expectations.
In terms of production, according to the Industry Association’s statistics, the output of Top 100backbone machine manufacturers from January to June 2019 was 2,212,600 units, down 17.43%. Amongthem, the production of flatbed lockstitch, overlock, interlock, medium and heavy materials sewing machine,automatic sewing equipments and embroidery machines all showed a downward trend year-on-year. Theoutput of household sewing machines was 716,600 units, a year-on-year decrease of 4.72%. The output ofthe equipment used befor/after sewing was 227,900 units, a year-on-year decrease of 2.14%.
In terms of sales, according to Industry Association’s statistics, from January to June 2019, thecumulative sales revenue of Top 100 backbone machine manufacturers in the industry was approx 9.857billion yuan, a year-on-year decrease of 9.7%, and the sales volume of sewing machinery products was331,900 units, down 6.72%; sales volume of industrial sewing machines of 2,368,500 units, down 8.66%year-on-year.In the first half of 2019, the domestic demand market for sewing equipment slowed down rapidly andentered negative growth. In the foreign trade market, industrial machine growth slowed down. From Januaryto June, China exported 1,246,800 industrial machines, down 3.86% year-on-year, amounting to US$602million, an increase of 2.31% year-on-year. The export volume and the growth rate have both turned negative.The export of common household sewing machines increased by 34.61%, year-on-year. And the export ofmultifunctional household machines decreased by 44.87%, year-on-year.Affected by factors such as lower production and sales, high inventory, and increased costs, theprofitability of enterprises declined in the first half of 2019, and the industry's benefits generally declined.According to Industry Association’s statistics, from January to June, the total profit of Top 103 machinemanufacturers in the industry reached 695 million yuan, a year-on-year decrease of 21%.
2. Description of major changes in main assets of the Company during the reporting period
For details of major changes in the Company's major assets in the report period, please refer to “(3)Analysis of assets and liabilities” in “Chapter 4 Disscussion and Analysis on Business Operation”.
The Company’s overseas assets amounted to 1,965.6851 million yuan, accounting for 46.36% of thetotal assets.
The Company’s overseas assets mainly come from the Company’s previous overseas acquisitions andthe business growth of overseas subsidiaries. The Company’s wholly-owned subsidiary SGE acquired DAAG in 2005, acquired PFAFF GmbH and KSL in 2013.
3. Core competitiveness analysis in the report period
The Company is the first listed company with the longest history in the domestic sewing equipmentindustry, and has more than 50-year experience in sewing equipment production. The Company’s "Butterfly"household sewing machine has a history of 100 years. The Company controlled DA AG and PFAFF GmbH,both are famous sewing machine manufacturing companies in the world with more than 150 years’ history,as well as PFAFF KSL Branch, which possesses the world's top sewing technology. During the reportingperiod, the Company continued to promote the integration of global resources, promote the furtherintegration of European subsidiaries, accelerate the construction of European and domestic manufacturingbases, and expand the main business. During the reporting period, the Company's core competitiveness wasfurther consolidated and enhanced, further consolidating the foundation of the Company's sustainable andhealthy development.The core competence of the Company is mainly shown in the following aspects:
(1) Strong technological research and development capability
The Company always adheres to the guidance of science and technology and develop throughinnovation, attaches much importance to the construction of technological research and developmentcapabilities, which have become the important force driving the development of the Company. The Companyhas owned a powerful technological research and development team, has advanced testing methods and hasstrong continuous development capabilities of product and application technology. The R&D team's researchand development of Industry 4.0 on sewing equipment has achieved initial results. The Company'stechnology center was identified as a Shanghai-Municipal-level R&D center, SGGEMSY was identified as aZhejiang-Province-level R&D center, and Richpeace was recognized as a Tianjin-Municipal-level R&Dcenter.
(2) Advanced technology advantage
The Company has the world’s high-end intelligent and 3D sewing technology of flexible material, andthe Company is a global leader in special sewing machine for medium or heavy materials, garment automaticsewing unit, robot-control automatic sewing technology and textile material welding technology and otherfields. The products are not only applied in the traditional market for sewing machine industry but alsoapplied in some fields, such as automobile, environmental protection, aeronautics and astronautics andrenewable energy, etc. Especially, the Company has a leaing position in sewing technology for light carbonfiber, 3D sewing automation and QONDAC 4.0 Intelligent Industrial Sewing Network Online ProductionMonitoring System.
(3) Multiple brand and product advantage
The Company adopts a multi-brand marketing strategy and has some world-famous industrial sewingequipment brands: ShangGong, DA, PFAFF Industrial, KSL, Mauser Spezial and Richpeace, and somefamous domestic brands: Butterfly, Bee, and Flyingman. The Company has a full range of high-end sewingequipment product chain, these brands of the Company has a high recognition and reputation in the industry.The Company has a group of customers with great value and stability in the field of high-end automotiveaccessories manufacturing and luxury goods manufacting.
(4) Global resource integration capability
The Company utilizes and develops the basis and advantages of its respective domestic and foreignsubsidiaries, implements globalization layout and integration in the production base, sales network,procurement of raw materials, technology R&D and other aspects, implements resource sharing, hascomplementary advantages and develops collaboratively. The Company not only has a wide sales networkand business base in China, but also has established a relatively complete marketing channel and servicenetwork in the world. The Company has established three sewing machine R&D and production bases inShanghai, Zhejiang and Zhangjiagang; the Company also has five R&D and manufacturing bases inGermany, Czech Republic and Romania.
(5) Internationalized operation and management experience
Since 2005, the Company has begun to implement an overseas merger and acquisition strategy forinternational operations. In recent years, the Company has increased the pace of overseas acquisitions andmergers, and the proportion of overseas businesses has grown. The Company's multi-year internationaloperation and management has gradually cultivated a management team with an international perspectiveand multinational operating capabilities, and has accumulated rich international management experience.
Chapter 4 Discussion and Analysis on the Business Operation
1. Discussion and analysis on the business operation
During the reporting period, under the situation of the year-on-year decline in production and sales ofthe sewing equipment industry, the company achieved operating income of 1.622 billion yuan, up 8.51%;operating profit of 95 million yuan, down 33.66%; the net profit attributable to shareholders of listedcompanies was 71 million yuan, down 29.46%. The decrease in profit was mainly due to the cyclicaladjustment of the sewing industry and the year-on-year decline of the downstream automotive industry, aswell as the reduction in sales of major profitable products of European subsidiaries. In the first half of 2019,the Company mainly carried out the following works:
(1). Vigorously promote institutional reform, the first implementation of the stock option incentive plan
In the first half of 2019, the Company further deepened the mechanism reform, implemented the stockoption incentive plan, explored to establish a more market-oriented incentive system, further improved the
corporate governance structure, and promoted the establishment and improvement of the long-term incentiveand restraint mechanism. It is conducive to the combination of the interests of shareholders, the Companyand the core team, so that all parties can pay attention to the long-term development of the Company andpromote the achievement of the medium and long-term goals of SGG.
2. Actively promote mergers and acquisitions and integration, purchase and sell sharesIn the first half of 2019, the Company promoted business integration in an orderly manner and exploredthe promotion of moderate diversification of manufacturing products. In the first half of the year, theCompany further promoted mergers and acquisitions and integration, and completed the repurchase of 9.97%equity of SHENSY. The capital increase of Shanghai ShangGong Financing Leasing Co., Ltd. is progressing.In Europe, the Company promotes the full integration of DA Group, PFAFF GmbH and KSL branches, andthrough integrated management, strives to reduce costs and strive for greater synergy. In China, theCompany steadily promoted the follow-up work of the relocation of Shanghai SMPIC Electronics Co.,Ltd.(hereinafter refers to SMPIC Electronics), as well as the integration of DAMSH, SMPIC Electronics andSGG’s Manufacturing Branch, and vigorously promoted the development of robot application technologyand intelligent manufacturing equipment business. In addition, the Company has also completed thefollow-up capital increase of Richpeace, and promoted the collaboration between Richpeace, DAMSH, andPFAFF/KSL.In addition, the Company also completed the sale of 26% equity of Stoll KG held by the Company’swholly-owned subsidiary DA AG, timely stopped the possible losses, and achieved certain investmentincome.
3. Adhere to market orientation and actively expand sales
The Company adheres to the market-oriented, benefit-first business philosophy, continue to implementa professional multi-brand marketing strategy, and strive to expand the market.
DA Group actively promoted the Qondac system in the first half of 2019 and launched the M-TypeDelta machine at Texprocess 2019. However, due to the decrease in investment in the downstreamautomotive industry and the weak growth of garment machines, the operating income and profit of DAGroup decreased in the first half of the year.
In China, the Company continues to integrate the domestic DAP sales platform, and integrates domesticbranches of DAP Shanghai, DAP Taizhou and Richpeace, and implements localized management of salesand maintenance personnels. Due to the decline of the market, the sales of standard products of DA and Pfaffbrands have stagnated in China. Although the export of basic products of ShangGong and Mauser brand hasincreased, the price competition is very fierce and the profit level is stretched. In the sales of leather heavyduty machines, sales of sewing equipment for the automotive industry decreased year-on-year, sales of sofasewing equipment increased to a certain extent, and sales of KSL automation equipment products alsoachieved significant growth.
In Southeast Asia, the Company strengthened the coordinated sales of its subordinate DAP Singapore,Ricepeace and SGGEMSY, and integrated customer resources to expand market share. Especially in theVietnamese market, SGG strengthened the dealer network and promote contract management. In South Asia,the Company focuses on marketing in countries such as India and Bangladesh, and vigorously supportsdealers. The sales of basic products have increased year-on-year.
Since the beginning of 2019, the Company's subordinate production companies, such as PIZ andSGGEMSY, have jointly assumed sales responsibilities with the Group’s sales organizations and realizedbudget indicators. Meanwhile, the production companies also assisted the Group’s sales organizations tomeet customer requirements for product price, function, quality improvement and maintenance services, andjointly control sales expenses.
In addition, in the first half of 2019, the Company made full use of the opportunity of the "Butterfly"brand’s 100-year anniversary, actively promoted the "Butterfly" brand, striving to achieve a substantialincrease in the sales of household sewing machines in the domestic and foreign markets.
(4) Consolidate product technology advantages and steadily promote smart manufacturing
In 2019, the Company continued to build the Bensheim Trial Base in Germany to enhance KSLproduction capacity. ShangGong Zhejiang accelerated the construction of the Taizhou IntelligentManufacturing Base, and with the assistance of SGGEMSY, did a good job in equipment selection and sitelayout of the base, and strived to complete the integration and commissioning by the end of 2019.
In terms of research and development, the Company continued to promote the development and trialproduction of industrial embroidery electric control, full motorized flat seam electric control machine,L-Type lockstitch; and promote the platform research and development of Mauser medium and heavymaterial machine as planned. Further promote the design-manufacturing-service integrated cloud platformdevelopment for apparel customization, and steadily promote the design and construction of intelligentmicro-factory projects.
A. Main Business Analysis
(1). Analysis of changes of items in financial statements
| Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 | % Change YOY | Note | |
| Operating income | 1,621,983,029.80 | 1,494,794,413.27 | 8.51 | Note 1 |
| Operating cost | 1,198,980,538.22 | 1,052,451,025.46 | 13.92 | Note 2 |
| Selling expenses | 176,161,929.09 | 147,600,554.52 | 19.35 | Note 3 |
| General and administration expenses | 121,131,457.00 | 108,118,771.87 | 12.04 | Note 4 |
| Finance expenses | 8,875,035.67 | 12,091,231.56 | -26.60 | Note 5 |
| R & D expenses | 50,364,765.95 | 46,437,804.54 | 8.46 | Note 6 |
| Net cash flow from operating activities | -107,010,991.19 | -57,703,154.75 | N/A | Note 7 |
| Net cash flow from investing activities | 148,029,731.87 | -78,130,173.37 | N/A | Note 8 |
| Net cash flow from financing activities | 89,156,265.15 | 53,164,117.81 | 67.70 | Note 9 |
| Impact of exchange rate changes on cash and cash equivalents | 3,559,382.88 | -5,925,323.34 | N/A | Note 10 |
Note 1: Mainly due to the increase in revenue from logistics services and the increase in revenue fromsewing equipment and intelligent manufacturing equipment.Note 2: Mainly due to the combined effect of increased operating income and corresponding increase in costand product structure changes.Note 3: Mainly due to the inclusion of Richpeace in the scope of consolidation at the end of August 2018.Note 4: Mainly due to the inclusion of Richpeace in the scope of consolidation at the end of August 2018.Note 5: Mainly due to the year-on-year increase in exchange gains.Note 6: Mainly due to the inclusion of Richpeace in the scope of consolidation at the end of August 2018.Note 7: Mainly due to the combined effects of tax refunds, purchase cash ratios and the year-on-year increasein cash paid to/for employees.Note 8: Mainly due to the comprehensive impact of the disposal of STOLL's equity and the increase inpurchase and construction of fixed assets.Note 9: Mainly due to the increase in bank loans over the same period last year.Note 10: Mainly due to the impact of changes in the euro exchange rate.
(2). Others
Analysis of Changes of Items in Income Statement
| Item | Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 | Change YOY | % Change YOY | Reason |
| Other income | 9,381,829.77 | 2,616,373.56 | 6,765,456.21 | 258.58 | Note 1 |
| Investment income | 26,827,200.38 | 17,485,066.32 | 9,342,134.06 | 53.43 | Note 2 |
| Fair value change income | 4,441,599.00 | 0.00 | 4,441,599.00 | N/A | Note 3 |
| Credit impairment loss | -5,101,160.00 | 0.00 | -5,101,160.00 | N/A | Note 4 |
| Asset impairment loss | -923,010.98 | 350,484.13 | -1,273,495.11 | -363.35 | Note 5 |
| Asset disposal income | -54,610.64 | -571,141.92 | 516,531.28 | N/A | Note 6 |
| Operating profit | 94,742,938.50 | 142,815,575.74 | -48,072,637.24 | -33.66 | Note 7 |
| Non-operating income | 1,425,209.20 | 3,355,954.72 | -1,930,745.52 | -57.53 | Note 8 |
| Non-operating expenses | 388,816.97 | 955,572.93 | -566,755.96 | -59.31 | Note 9 |
| Income tax expense | 19,700,782.13 | 32,930,028.35 | -13,229,246.22 | -40.17 | Note 10 |
| Other comprehensive income (net, after tax) | -6,205,566.73 | -27,605,940.81 | 21,400,374.08 | N/A | Note 11 |
Note 1: Mainly due to the comprehensive impact of the increase from the inclusion of Richpeace in the scopeof consolidation at the end of August 2018 and the increase in financial support funds.Note 2: Due to the completion of the transfer of 26% equity of STOLL held by DA AG in the current period.Note 3: Due to the implementation of the new financial instruments guidelines, which increased gains fromchanges in fair value during the period.Note 4: Due to the company's implementation of the new financial instruments guidelines, credit losses dueto the expected credit loss rate.Note 5: Mainly due to the increase in provision for inventory depreciation.Note 6: Mainly due to the reduction in disposal losses of fixed assets.Note 7: Mainly due to the year-on-year decline in the automotive industry, the product structure of saleschanges, the gross profit margin decreased year-on-year and other comprehensive effects.Note 8: Mainly due to the comprehensive impact of the company's parent company's completion of theShanghai Pacific Industrial Co., Ltd. shareholder business change and recognition of equity.Note 9: Mainly due to the reduction in external donation expenses.Note 10: Mainly due to the year-on-year decrease in the net profit of the DA Group with high income taxrate.Note 11: Mainly due to the combination of the gains and losses from changes in fair value ofavailable-for-sale financial assets and the reduction in translation differences in foreign currency.
Main Business by Industry:
| Industry | Operating income | Operating cost | Gross margin (%) | Operating income increase/ decrease (%) | Operating cost increase/ decrease (%) | Gross margin increase/ decrease (%) |
| Sewing equipment & intelligent equipment | 1,048,999,399.01 | 681,060,264.05 | 35.08 | 6.41 | 12.45 | Decrease 3.48 percent |
| Logistic service | 464,735,166.06 | 433,211,379.97 | 6.78 | 28.21 | 31.91 | Decrease 2.62 percent |
| Export trade | 48,526,259.61 | 47,486,606.86 | 2.14 | -32.48 | -32.16 | Decrease 0.46 percent |
| Office equipment and film materials | 15,717,188.39 | 13,218,488.02 | 15.90 | -46.00 | -47.47 | Increase 2.36 percent |
| Others | 1,577,978,013.07 | 1,174,976,738.90 | 25.54 | 8.89 | 14.16 | Decrease 3.44 percent |
Main Business by Region:
| Region | Operating income | Operating income increase/ decrease (%) |
| Domestic | 997,668,461.79 | 20.89 |
| Overseas | 664,958,966.77 | -8.81 |
B. Explanation of Major Changes in Profits Caused by Non-Core BusinessNot applicable.
C. Analysis of Assets and Liabilities
1. Assets and Liabilities
| Item | Ending balance of current period | Ending balance to total assets of current period（%） | Ending balance as of December 31, 2018 | Ending balance to total assets as of December 31, 2018（%） | Change（%） | Notes |
| Transactional financial assets | 90,854,497.33 | 2.14 | 0.00 | 0.00 | N/A | Due to the implementation of the new financial instruments guidelines since January 1, 2019. |
| Prepayments | 66,937,970.46 | 1.58 | 39,695,762.85 | 0.96 | 68.63 | Mainly due to the increase in the amount of goods paid by the domestic subsidiaries in the current period. |
| Available for sale financial assets | 0.00 | 0.00 | 117,733,027.78 | 2.84 | -100.00 | Due to the implementation of the new financial instruments guidelines since January 1, 2019. |
| Long-term receivables | 60,884,478.09 | 1.44 | 31,427,418.92 | 0.76 | 93.73 | Mainly due to the increase in the amount of financing lease receivables from the domestic subsidiary SGSB Finance Leasing Company. |
| Long-term equity investment | 0.00 | 0.00 | 248,368,207.89 | 5.99 | -100.00 | Due to the completion of the transfer of 26% equity of STOLL held by DA AG in the current period. |
| Other equity investment | 93,257,774.18 | 2.20 | 0.00 | 0.00 | N/A | Due to the implementation of the new financial instruments guidelines since January 1, 2019. |
| Construction in progress | 161,615,652.26 | 3.81 | 119,166,627.75 | 2.88 | 35.62 | Mainly due to the increase in production and R&D base construction projects by domestic and foreign subsidiaries during the current period.。 |
| Development expenditure | 9,506,463.11 | 0.22 | 6,798,312.48 | 0.16 | 39.84 | Mainly due to the increase in capital R&D expenditures of domestic and foreign subsidiaries during the period. |
| Short-term loan | 295,933,464.04 | 6.98 | 206,614,015.12 | 4.99 | 43.23 | Mainly due to the increased short-term working capital borrowing from the bank in the current period. |
| Taxes payable | 13,713,219.67 | 0.32 | 21,208,862.17 | 0.51 | -35.34 | Mainly due to the decrease in value-added tax and corporate income tax payable by the company in the current period compared with the end of the previous year. |
| Non-current liabilities due within one year | 921,178.53 | 0.02 | 4,173,297.07 | 0.10 | -77.93 | Mainly due to the company's transfer of the industrial development financial support fund project originally included in “Deferred Income” to “Other Income”。 |
| Long-term payables | 2,168,925.47 | 0.05 | 3,403,296.49 | 0.08 | -36.27 | Mainly due to the decrease in financing leases payable over one year at the end of the period compared to the end of the previous year. |
| Other comprehensive income | -35,141,425.78 | -0.83 | -75,701,094.41 | -1.83 | N/A | Due to the implementation of the new financial instruments guidelines since January 1, 2019. |
2. Main Assets Restricted as of the End of the Reporting Period
Not applicable.
D. Investment Analysis
1. General Analysis
Unit: 10,000 Yuan
| Long-term equity investment from January 1, 2019 to June 30, 2019 | 4966.72 |
| Increase/Decrease | 2966.32 |
| Long-term equity investment from January 1, 2018 to June 30, 2018 | 2,000 |
| Increase/Decrease (%) | 148.32% |
(1) Significant Equity Investment
Unit: 10,000 Yuan
| Project | Main business | Total Amount | Shareholding ratio | Investment in 2018 | Cumulative investment amount | Sources of funds | Lawsuit |
| Purchase 9.97% shares of SHENSY | Transportation of goods | 3,016.32 | 50% | 3,016.32 | 3,016.32 | Self-owned funds | No |
| Capital increase of Richpeace | Automatic special equipment, high-tech content (light, machine, electricity integration) special sewing equipment manufacturing; high-end textile and apparel software design, development | 1,950 | 65% | 1,950 | 1,950 | Self-owned funds | No |
(2) Major non-equity investment
| Item | Total amount | Actual investment amount for the current year | Cumulative actual investment amount | Sources of funds | Project progress |
| Investment in the construction of Taizhou Manufacturing Base | 394 million yuan | RMB 44.09 million yuan | RMB 98.412 million yuan | Self-owned funds & raised funds | Under construction |
| Investment in the construction of the European intelligent product research and development center and manufacturing base | 13.39 million euros | EUR 3,342,961.38 | EUR 6,056,406.59 | Self-owned funds | Under construction |
For the fundraising project of the Company, please refer to the Company's "Special Report on the Depositand Actual Use of Raised Funds (First Half of 2019)"
(3) Financial assets measured at fair value
| Item | Initial investment cost | Book value as of June 30, 2019 | Profi/loss during the report period | Changes in fair value during the report period |
| Listed company stock | 74,016,342.53 | 90,854,497.33 | 1,614,968.82 | 4,441,599.00 |
| Non-listed company equity | 29,148,249.49 | 91,079,774.22 | - | 2,594,583.52 |
| Total | 103,164,592.02 | 181,934,271.55 | 1,614,968.82 | 7,036,182.52 |
E. Major assets and equity sales
| Project name | Target | Amount | Estimated profit | Approval authority | Progress |
| Sell 26% equity of H. Stoll Co. AG & KG | 26% equity of H. Stoll Co. AG & KG | 34,750,935 euro | 22,150,051.44 yuan | Board of Directors | The equity transfer has been completed on May 22, 2019, Germany. DA AG has received the equity transfer price of 34,750,935 euros on May 23, 2019, Germany. |
F. Analysis of Major Subsidiaries
Unit: 10,000 Yuan
| Name | Business Scope | Registered capital | Total assets | Net assets | Operating income | Operating profit | Net profit |
| DA AG | Production, processing and sale of machines, machines and related parts and software, in particular sewing machines and conveyors and other industrial products | �12.5 million euro | 191,997 | 92,283 | 66,719 | 6,634 | 4,858 |
| SHENSY | Transportation of goods | 17,882 | 49,779 | 26,521 | 46,474 | 545 | 429 |
| SGGEMSY | Manufacturing and sales of various sewing equipment | 21,600 | 36,424 | 21,163 | 16,616 | -253 | -249 |
| Richpeace | Automatic special equipment, high-tech content (light, machine, electricity integration) special sewing equipment manufacturing; high-end textile and apparel software design, development | 8,000 | 23,058 | 8,997 | 9,253 | 687 | 717 |
2. Other Maters
(1) Warnings and explanations that the accumulated net profit from the beginning of the year to theend of the next reporting period may be a loss or a significant change from the same period of theprevious yearNot applicable.
(2) Possible risks
Industrial and market riskThe sewing equipment industry is an industry full of market competition, with obvious periodicity, andhas strong dependence on downstream textile and garment, leather bags and other industries, and is greatlyaffected by the macroeconomic environment. Due to the large proportion of the Company's sewingequipment industry, the Company is more likely to be affected by the overall industry fluctuations. TheCompany may face increased competition in the industry, lower gross profit margins and lower productprices.Transnational operations and integration riskWith the expansion of the Company's overseas assets and business scale, transnational operations putforward higher requirements for the Company's organizational structure, business model, management teamand staff. In the process of production, operation and the integration of overseas subsidiaries, the Companywill face challenges arising from differences in domestic and international policy systems, corporate cultureand management concepts.Risk of exchange rate fluctuationsThe bookkeeping base currency of the Company's consolidated statements is RMB. Domestic productexports are mostly settled in US dollars. The daily operations of the Company's subsidiary DAP AG and itsholding subsidiaries are mainly settled in foreign currencies such as the Euro. Fluctuations in the RMBexchange rate will bring certain exchanges on the future operation of the Company, resulting in assetdepreciation risk.
Chapter 5 Important Matters
1. Shareholders' Meeting
| Session | Convening date | Website published the resolution | Date of the disclosure of the resolution |
| 2019 First Extraordinary Shareholders’ Meeting | March 18, 2019 | www.sse.com.cn | March 19, 2019 |
| 2018 Annual Shareholders’ Meeting | June 21, 2019 | www.sse.com.cn | June 22, 2019 |
2. Profit Distribution Plan or Capital Reserve Fund Transfer Plan
During the reporting period, the Company did not make profit distribution, nor did it convert capitalreserve into share capital.
3. Commitment
PKFR promised that its shareholding ratio will not be reduced to less than the shareholding ratio ofPudong SASAC within 36 months from the date of stock delivery. The commitment period is fromDecember 29, 2016 to December 28, 2019. It is being strictly implemented.
4. Appointment of Accounting Firms
Not applicable.
5. Bankruptcy
Not applicable.
6. Major lawsuits and arbitrations
The arbitration between the Stoll’s family shareholders and the Company's wholly-owned subsidiaryDA AG regarding the adjustment of the capital increase price in 2015 has been terminated after the twoparties signed the "equity transfer contract".
7. Penalties and rectification of listed companies and their directors, supervisors, senior
management personnel, controlling shareholders, actual controllers and purchaser
Not applicable.
8. Explanation of the integrity of the company and its controlling shareholders and actual
controllers during the reporting period
Not applicable
9. The Company's Equity Incentive Plan, Employee Stock Ownership Plan or Other Employee
Incentives
| Summary of matters | Query index |
| The 10th meeting of the 8th Board of Directors held on February 28, 2019, reviewed and approved the “Proposal on the Company's <2019 Stock Option Incentive Plan (Draft) and its Summary “(hereinafter referred to as the “Incentive Plan”) , "Proposal on the Company's <2019 Stock Option Incentive Plan Implementation Assessment Management Method" and "Proposal on Requesting the Company's Shareholders’ Meeting to Authorize the Board of Directors to Handle Issues Related to the 2019 Stock Option Incentive Plan". The Company's independent directors issued independent opinions on the relevant proposals of the Incentive Plan. The 8th meeting of the 8th Board of Supervisors held on February 28, 2019, reviewed and | Relevant announcements disclosed by the Company on March 2, 2019 |
| Summary of matters | Query index |
| approved the Proposal on the Company's <2019 Stock Option Incentive Plan (Draft) and its Summary , "Proposal on the Company's <2019 Stock Option Incentive Plan Implementation Assessment Management Method" and“Proposal on Reviewing the List of Incentives for the First Time of the Company's 2019 Stock Option Incentive Plan” | |
| The Company publicized the list of incentives on the Company's official website from March 2 to March 12, 2019. During the publicity period, the Company did not receive any objections from employees to this incentive object. The ninth meeting of the 8th Board of Supervisors held on March 12, 2019, reviewed and approved the "Explanation of the review opinions and publicity of the company's 2019 stock option incentive plan for the first time." | Relevant announcements disclosed by the Company on March 13, 2019 |
| The Company conducted a self-examination on the trading of the Company's stock by the insiders, and, disclosed the self-examination report on March 19, 2019 | The self-examination report disclosed on March 19, 2019 |
| The company's first extraordinary shareholders meeting held on March 18, 2019, reviewed and approved the “Proposal on the Company's <2019 Stock Option Incentive Plan (Draft) and its Summary” , "Proposal on the Company's <2019 Stock Option Incentive Plan Implementation Assessment Management Method" and "Proposal on Requesting the Company's Shareholders’ Meeting to Authorize the Board of Directors to Handle Issues Related to the 2019 Stock Option Incentive Plan". | Relevant announcements disclosed by the Company on March 19, 2019 |
| The 11th meeting of the 8th Board of Directors held on April 12, 2019, reviewed and approved the “Proposal on Adjusting the List of Incentives and the Amounts of Grants for the First Time of the 2019 Stock Option Incentive Plan” and the “”Proposal to Grant Stock Options for the First Time”. The independent directors of the Company issued independent opinions on related matters. The 10th meeting of the 8th Board of Supervisors held on April 12, 2019, reviewed and approved the “Proposal on Adjusting the List of Incentives and the Amounts of Grants for the First Time of the 2019 Stock Option Incentive Plan” and the “”Proposal to Grant Stock Options for the First Time”. The Company's Board of Supervisors has checked the issues related to the company's stock options. | Relevant announcements disclosed by the Company on April 16, 2019 |
10. Major related party transactions
The 29th meeting of the 8th Board of Directors held on April 29, 2019, reviewed and approved the“Proposal on Jointly Raising Capital with Shanghai SGSB Financial Leasing Co., Ltd. with Related Persons(Related Transaction)”. (For details, please refer to Announcement No. 2019-027 disclosed by SGG on April30, 2019). Currently, the matter is in progress.
11. Significant contracts and their implementation
(1) Trusteeship, contracting and lease
Not applicable.
(2) Guarantee
Unit: 10,000 Yuan, Currency: RMB
| Guarantor | Relations of the guarantor to listed company | Security party | Amount guaranteed | Guarantee date (agreement signoff date | Start date | Expiration date | Type | If guarantee is done | Overdue | Overdue amounts | If counter guarantee available? | Guarantee for related party? | Relation |
| SGG | The Company | Industrial & Commercial Bank of China Shanghai Hongkou Branch | 6,254 | 2015/12/21 | 2015/12/21 | 2020/12/21 | Joint liability guarantee | No | No | 0 | No | No | |
| Guarantee amounts spent during the report period (excluded guarantee to affiliate company. | |||||||||||||
| Total balance of guarantee at the end of period (affiliate companies are not quailed.)（A） | 6,254 | ||||||||||||
| Guarantee of company to affiliates | |||||||||||||
| Total guarantee amounts of subsidiaries in the report period | -6,000 | ||||||||||||
| Total balance of guarantee to subsidiaries at the end of report period (B) | 0 | ||||||||||||
| Company total guarantee amounts (including those to subsidiaries) | |
| Total guarantee amounts（A+B） | 6,254 |
| Ratio of total guarantee amounts to company net assets (%) | 2.68 |
| In which: | |
| Guarantee amounts provided to stockholders, actual controller and affiliated parties (C) | 0 |
| Guarantee amounts directly or indirectly provided for liabilities of guarantor whose assets liabilities ratio is higher than 70%（D） | - |
| Differences of total guarantee amounts exceeds 50% of the net assets（E） | 0 |
| Total guarantee amounts of the above-mentioned three items （C+D+E） | - |
| Note | On 21st December 2015, the Company's wholly owned subsidiary DA AG (formerly known as SGE) applied to the Frankfurt Branch of ICBC for a limit loan of 7.878 million euro so as to pay the acquisition fee to Stoll KG. ICBC Shanghai Hongkou Branch issued a financing guarantee letter for the funds, and the Company issued an unconditionally irrecoverable corporate letter of guarantee for self-using fix assets where No.603 Dapu Road as counter guarantee for the abovementioned financing guarantee letter. |
(3) Other Major Contracts
Not applicable.
12. Poverty Alleviation Work of Listed Companies
Not applicable.
13. Convertible Corporate Bonds
Not applicable.
14. Environmental Information
The Company and its subsidiaries are not key pollutant discharge units announced by the environmentalprotection department. During the reporting period, the Company and its subsidiaries strictly implementedthel laws and regulations on environmental protection, formulated strict environmental practices, andadopted corresponding measures for pollution sources.
15. Other Important Matters
(1) The Contents, Causes and Effects of Changes in Accounting Policies, Accounting Estimates and
Accounting Methods
On April 30, 2019, the Ministry of Finance issued the Notice on Amending the 2019 Annual FinancialStatements of General Enterprises (Accounting (2019) No. 6), and revised the financial statement format ofgeneral enterprises. In 2017, the Ministry of Finance revised and promulgated four accounting standardsrelated to financial instruments, the "Accounting Standards for Business Enterprises No. 22 - Recognitionand Measurement of Financial Instruments" (Accounting [2017] No. 7), "Accounting Standards for BusinessEnterprises No. 23 - Transfer of Financial Assets" (Accounting [2017] No. 8), "Accounting Standards forBusiness Enterprises No. 24 - Hedging" (Accounting [2017] No. 9), "Accounting Standards for BusinessEnterprises No. 37 - Financial Instruments Presentation" (Finance [2017] No. 14) (hereinafter referred to asthe “New Financial Instruments Guidelines”). Enterprises listed both in China and overseas shall implementthe above guidelines from January 1, 2018. Other domestic listed companies shall implement the aboveguidelines from January 1, 2019. The Company is a domestic listed company, and the New FinancialInstrument Guidelines shall be implemented from January 1, 2019. The main impacts of the Company'simplementation of the above provisions are as follows:
| Content and reasons for changes in accounting policies | Name and Amount of the Item that is Affected |
| (1) The “notes receivable and accounts receivable” in the balance sheet are divided into “notes receivable” and “accounts receivable”; “notes payable and accounts payable” are divided into | “Notes receivable and accounts receivable” in the balance sheet are divided into “notes receivable” and “accounts receivable”. The amount of “notes receivable” |
| Content and reasons for changes in accounting policies | Name and Amount of the Item that is Affected |
| “notes payable” and “accounts payables”. The comparison data is adjusted accordingly. | was RMB 60,046,109.79 yuan from January 1, 2019 to June 30, 2019, and the amount from January 1, 2018 to June 30, 2018 was RMB 81,482,151.15 yuan. the amount of “accounts receivable” was RMB 602,322,319.41 yuan from January 1, 2019 to June 30, 2019, and the amount from January 1, 2018 to June 30, 2018 was RMB 536,278,543.75; “Notes payable and accounts payable” are divided into “notes payable” and “accounts payables”. The amount of “notes payable” was RMB 66,510,597.85 yuan from January 1, 2019 to June 30, 2019, and the amount i from January 1, 2018 to June 30, 2018 was RMB 71,109,160.21 yuan. The amount of “accounts payable” was RMB 214,381,121.77 yuan from January 1, 2019 to June 30, 2019, and the amount i from January 1, 2018 to June 30, 2018 was RMB 247,693,879.70 yuan. |
| (2) Notes Receivable and accounts receivable measured at fair value through other comprehensive income are reclassified from “other current assets” to “receivables financing”; the comparative data is adjusted accordingly. | N/A |
| (3) Under the investment income in the income statement, the item “where: the financial assets are recognized and recognized as amortized cost” is added, and the comparative data is not adjusted. | N/A |
| (4) The financial assets are classified as “financial assets measured at amortized cost” and “fairly The financial assets whose value is measured and whose changes are included in other comprehensive income, and the financial assets measured at fair value through profit or loss. (5) Adjusted the accounting treatment of non-trading equity instrument investment. Allowing an enterprise to designate a non-trading equity instrument investment to be measured at fair value and its changes are included in other comprehensive income, but the designation is irrevocable and should be included in the cumulative gain or loss previously recognised in other comprehensive income. Transfers to retained earnings shall not be carried forward to the current profits and losses. (6) The impairment of financial assets was changed from “the loss occurred method” to “expected loss method”, and the scope of the provision was expanded to make provision for impairment of financial assets more timely and full, revealing and preventing financial asset credit risk (7) The judgment principle of financial assets transfer and its accounting treatment are further clarified. (8) The hedge accounting standard expands the scope of eligible hedged items and hedging instruments, replaces quantitative requirements with qualitative hedge effectiveness test requirements, and introduces a “rebalancing” mechanism for hedging relationships. (9) The relevant disclosure requirements for financial instruments are adjusted accordingly. | Retrospective adjustment of consolidated statement data at the beginning of the year: 1. Increase trading financial assets: 86,406,778.33 yuan; 2. Reduce accounts receivable: 563,078.70 yuan; 3. Reduce other receivables: 91,853.79 yuan; 4. Reduce available-for-sale financial assets: 117,733,027.78 yuan; 5. Adjust other comprehensive income: 46,940,385.41 yuan; 6. Adjust undistributed profit: 11,741,623.31 yuan. |
(2) The Situation of Major Accounting Errors Corrected during the Reporting Period that Need to beRetrospectively Re-stated, the Amount of Correction, the Reason and its ImpactNot applicable.
Chapter 6 Changes in Common Shares and Shareholders
1. Changes in Share Capital
(1) Changes in Shares
During the reporting period, the Company's total shares and share capital structure did not change.
(2) Changes in Restricted Shares
Not applicable.
2. Shareholders
(1) Total Number of Shareholders
As of the end of the reporting period, the Company had a total of 53,212 common shareholders,including 27,017 shareholders of A shares and 26,195 shareholders of B shares.
(1) The shareholdings of the top ten shareholders as of the end of the reporting period
Unit: Share
| Top Ten Shareholders' Shareholdings | |||||||||
| Name | +/- | shares held at the end of the period | % | Shares held under restricted conditions | Pledge or freeze of shares | Nature | |||
| Status | Amount | ||||||||
| Shanghai Puke Flyingman Investment Co., Ltd. | 0 | 60,000,000 | 10.94 | 0 | Pledge | 60,000,000 | Domestic non-state legal person | ||
| State-owned Assets Supervision and Administration Commission of Shanghai Pudong New Aear People’s Government | 0 | 45,395,358 | 8.27 | 0 | / | State | |||
| China Great Wall Asset Management Co., Ltd. | 0 | 22,200,000 | 4.05 | 0 | / | State-owned legal person | |||
| Shanghai International Group Asset Management Co., Ltd. | 0 | 10,968,033 | 2.00 | 0 | / | State-owned legal person | |||
| SCBHK A/C KG INVESTMENTS ASIA LIMITED | -558,000 | 4,872,440 | 0.89 | 0 | / | Foreign legal person | |||
| ISHARES CORE MSCI EMERGING MARKETS ETF | -134,300 | 4,854,960 | 0.88 | 0 | / | Foreign legal person | |||
| Great Wall Guorong Investment Management Co., Ltd. | 0 | 4,770,654 | 0.87 | 0 | / | State-owned legal person | |||
| Guosheng Securities Co., Ltd. | 0 | 4,617,046 | 0.84 | 0 | / | Unknown | |||
| VANGUARD EMERGING MARKETS STOCK INDEX FUND | 3,678,113 | 0.67 | 0 | / | Foreign legal person | ||||
| Zeng Weili | 10,000 | 3,497,900 | 0.64 | 0 | / | Demostic natural person | |||
| Top Ten Unrestricted Shareholders' Shareholdings | |||||||||
| Name | Shares held in unrestricted conditions | Share type and amount | |||||||
| Type | Amount | ||||||||
| Shanghai Puke Flyingman Investment Co., Ltd. | 60,000,000 | A share | 60,000,000 | ||||||
| State-owned Assets Supervision and Administration Commission of Shanghai Pudong New Aear People’s Government | 45,395,358 | A share | 45,395,358 | ||||||
| China Great Wall Asset Management Co., Ltd. | 22,200,000 | A share | 22,200,000 | ||||||
| Shanghai International Group Asset Management Co., Ltd. | 10,968,033 | A share | 10,968,033 | ||||||
| SCBHK A/C KG INVESTMENTS ASIA LIMITED | 4,872,440 | B share | 4,872,440 | ||||||
| ISHARES CORE MSCI EMERGING MARKETS ETF | 4,854,960 | B share | 4,854,960 | ||||||
| Great Wall Guorong Investment Management Co., Ltd. | 4,770,654 | A share | 4,770,654 | ||||||
| Guosheng Securities Co., Ltd. | 4,617,046 | A share | 4,617,046 | ||||||
| VANGUARD EMERGING MARKETS STOCK INDEX FUND | 3,678,113 | B share | 3,678,113 | ||||||
| Zeng Weili | 3,497,900 | A share | 3,497,900 | ||||||
| Note | PKFR is a subsidiary of Shanghai Pudong Technology Investment Co., Ltd., which has a relationship. Shanghai Pudong Technology Investment Co., Ltd. directly holds 789,457 A shares of the company, and PKFR holds 60,000,000 A sharesof the company. GreatWall Guorong Investment Management Co., Ltd. is a wholly-owned subsidiary of China GreatWall Asset Management Co., Ltd., and there is a relationship; the Company is not aware of any relationship or concerted action among other shareholders. |
Amount of Shares Held by the Top 10 Shareholders with Restrictions on Sales and the Conditions forRestricted Sales: Not applicable.
(2) Strategic Investors or General Legal Persons Become Top 10 Shareholders due to Placement ofNew Shares
Not applicable.
3. Change of Controlling Shareholder or Actual Controller
Not applicable.
Chapter 7 Preferred Stock
Not applicable
Chapter 8 Directors, Supervisors and Senior Executives
1. Changes in Shareholding
(1) Changes in Shareholdings of Current/Departing Directors, Supervisors and Senior ExecutivesNot applicable.
(2) Equity Incentives Granted to Directors, Supervisors and Senior Executives during the ReportingPeriod
Unit: Share
| Name | Title | Stock options held at the beginning of the period | Stock options granted during the reporting period | Stock option exercisable during the reporting period | Stock option exercised during the reporting period | Stock options held at the end of the period |
| Zhang Min | Director / Senior executive | 0 | 250,000 | 0 | 0 | 250,000 |
| Li Jiaming | Senior executive | 0 | 191,000 | 0 | 0 | 191,000 |
| Fang Haixiang | Senior executive | 0 | 189,000 | 0 | 0 | 189,000 |
| Li Xiaofeng | Senior executive | 0 | 189,000 | 0 | 0 | 189,000 |
| Xia Guoqiang | Senior executive | 0 | 180,000 | 0 | 0 | 180,000 |
| Zhao Lixin | Senior executive | 0 | 118,800 | 0 | 0 | 118,800 |
| Zhang Jianrong | Senior executive | 0 | 86,400 | 0 | 0 | 86,400 |
| Total | / | 0 | 1,204,200 | 0 | 0 | 1,204,200 |
2. Changes in Directors, Supervisors and Senior Executives of the Company
| Name | Title | Change |
| Lu Yujie | Director | Outgoing |
| Qiao Junhai | Supervisor, Chairman of the Board of Supervisors | Outgoing |
| Qiu Jian | Director | Election |
| Ni Ming | Supervisor, Chairman of the Board of Supervisors | Election |
Note 1: On May 22, 2019, the Company's Board of Directors received a written resignation requestfrom the Company's director, Mr. Lu Yujie. Mr. Lu Yujie applied for resignation as a director of theCompany and a member of the Strategy Committee of the Board of Directors due to work adjustment. Afterresigning, Mr. Lu Yujie no longer holds any position in the Company. (For details, please refer toAnnouncement No. 2019-035 disclosed on May 23, 2019)
Note 2: On May 23, 2019, the company received a written resignation report from Mr. Qiao Junhai,Chairman of the Board of Supervisors. Mr. Qiao Junhai resigned as a supervisor and the Chairman of theBoard of Supervisors due to his retirement. After Mr. Qiao Junhai resigned, he no longer held any position inthe Company. (For details, please refer to Announcement No. 2019-036 disclosed on May 25, 2019)
Note 3: The 2018 Annual Shareholders’ Meeting of the Company held on June 21, 2019 agreed to electMs. Qiu Jian as a director of the Company and agreed to elect Mr. Ni Ming as a supervisor of the Company.(For details, please refer to Announcement No. 2019-044 disclosed on June 22, 2019)
Note 4: The Company held the 14th meeting of the 8th Board of Supervisors at 4:30 pm on June 21,2019, and agreed to elect Mr. Ni Ming as the chairman of the company's board of supervisors. (For details,please refer to Announcement No. 2019-045 disclosed on June 22, 2019)
Chapter 9 Corporate Bonds
Not applicable.
Chapter 10 Financial Report
1. Audit Report
Not applicable.
2. Financial Statements
Shang Gong Group Co., Ltd.Consolidated Statement of Financial Position
June 30, 2019
| Item | Note | June 30, 2019 | December 31, 2018 |
| Current assets: | |||
| Cash and cash equivalents | 725,154,280.84 | 595,034,146.11 | |
| Deposit reservation for balance | |||
| Lending funds | |||
| Transactional financial assets | 90,854,497.33 | ||
| Financial assets at fair value whose fluctuation is attributed to profit or loss for current period | |||
| Derivative financial assets | |||
| Notes receivable | 60,046,109.79 | 81,482,151.15 | |
| Accounts receivable | 602,322,319.41 | 536,278,543.75 | |
| Receivable financing | |||
| Prepayment | 66,937,970.46 | 39,695,762.85 | |
| Premiums receivable | |||
| Reinsurance accounts receivable | |||
| Provision of cession receivable | |||
| Other receivables | 88,782,983.97 | 120,422,496.29 | |
| Including: Interest receivable | |||
| Dividends receivable | 27,041,989.94 | ||
| Redemptory monetary capital for sale |
| Item | Note | June 30, 2019 | December 31, 2018 |
| Inventories | 973,002,780.02 | 896,977,884.83 | |
| Assets held for sale | |||
| Non-current assets maturing within one year | |||
| Other current assets | 207,087,332.40 | 249,326,335.31 | |
| Total current assets | 2,814,188,274.22 | 2,519,217,320.29 | |
| Non-current assets: | |||
| Loans and payments on behalf | |||
| Debt investment | |||
| Available-for-sale financial assets | 117,733,027.78 | ||
| Other debt investment | |||
| Held-to-maturity investments | |||
| Long-term receivables | 60,884,478.09 | 31,427,418.92 | |
| Long-term equity investments | 248,368,207.89 | ||
| Other equity investment | 93,257,774.18 | ||
| Other non-current financial assets | |||
| Investment properties | 141,529,432.00 | 145,386,135.12 | |
| Fixed assets | 473,459,229.06 | 473,157,221.59 | |
| Construction in progress | 161,615,652.26 | 119,166,627.75 | |
| Productive biological assets | |||
| Oil and gas assets | |||
| Right-of-use assets | |||
| Intangible assets | 269,837,384.46 | 270,072,349.34 | |
| Development expenditures | 9,506,463.11 | 6,798,312.48 | |
| Goodwill | 139,832,829.09 | 140,074,270.28 | |
| Long-term deferred expenses | 3,917,570.73 | 3,875,409.77 | |
| Deferred income tax assets | 72,437,910.02 | 68,850,860.84 | |
| Other non-current assets | |||
| Total non-current assets | 1,426,278,723.00 | 1,624,909,841.76 | |
| Total assets | 4,240,466,997.22 | 4,144,127,162.05 | |
| Current liabilities: | |||
| Short-term loans | 295,933,464.04 | 206,614,015.12 | |
| Borrowings from central bank | |||
| Borrowings from banks and other financial institutions | |||
| Transactional financial liabilities | |||
| Financial liabilities at fair value whose fluctuation is attributed to profit or loss for current period | |||
| Derivative financial liabilities | |||
| Notes payable | 66,510,597.85 | 71,109,160.21 | |
| Accounts payable | 214,381,121.77 | 247,693,879.70 | |
| Receipt in advance | 73,995,073.96 | 75,412,987.77 | |
| Financial assets sold for repurchase | |||
| Deposits from customers and interbank | |||
| Acting trading securities | |||
| Acting underwriting securities | |||
| Employee benefits payable | 82,735,517.09 | 101,169,469.49 | |
| Taxes and surcharges payable | 13,713,219.67 | 21,208,862.17 | |
| Other payables | 205,888,371.99 | 254,827,223.50 | |
| Including: Interest payable | 927,338.69 | 805,898.77 | |
| Dividends payable | 1,032,818.86 | 1,032,818.86 | |
| Handling charges and commissions payable | |||
| Reinsurance accounts payable | |||
| Liabilities held for sale | |||
| Non-current liabilities maturing within one year | 921,178.53 | 4,173,297.07 | |
| Other current liabilities | 46,902.00 | 47,083.80 | |
| Total current liabilities | 954,125,446.90 | 982,255,978.83 | |
| Non-current liabilities: | |||
| Provision for insurance contracts | |||
| Long-term loans | 357,436,483.87 | 340,477,650.27 | |
| Bonds payable | |||
| Including: preference shares | |||
| Perpetual bond |
| Item | Note | June 30, 2019 | December 31, 2018 |
| Lease liability | |||
| Long-term payables | 2,168,925.47 | 3,403,296.49 | |
| Long-term employee benefits payable | 225,793,814.95 | 234,036,612.41 | |
| Estimated liabilities | 672,720.00 | ||
| Deferred income | |||
| Deferred income tax liabilities | 76,809,893.48 | 70,805,236.44 | |
| Other non-current liabilities | 520,000.00 | 520,000.00 | |
| Total non-current liabilities | 662,729,117.77 | 649,915,515.61 | |
| Total liabilities | 1,616,854,564.67 | 1,632,171,494.44 | |
| Owners' equity | |||
| Share capital | 548,589,600.00 | 548,589,600.00 | |
| Other equity instruments | |||
| Including: preference shares | |||
| Perpetual bond | |||
| Capital reserves | 915,580,674.78 | 916,215,448.24 | |
| Less: treasury stock | |||
| Other comprehensive income | -35,141,425.78 | -75,701,094.41 | |
| Special reserves | |||
| Surplus reserves | 4,546,242.52 | 4,546,242.52 | |
| General risk reserves | |||
| Undistributed profits | 901,602,627.12 | 819,208,053.71 | |
| Total owners' equity attributable to the parent company | 2,335,177,718.64 | 2,212,858,250.06 | |
| Minority interest | 288,434,713.91 | 299,097,417.55 | |
| Total owners' equity | 2,623,612,432.55 | 2,511,955,667.61 | |
| Liabilities and owners' equity | 4,240,466,997.22 | 4,144,127,162.05 |
Legal representative: Zhang Min Financial director: Zhang Jianrong Financial manager: Zhao Lixin
Shang Gong Group Co., Ltd.Statement of Financial Position
June 30, 2019
| Item | Note | June 30, 2019 | December 31, 2018 |
| Current assets: | |||
| Cash and cash equivalents | 111,326,283.02 | 125,257,400.64 | |
| Transactional financial assets | 90,854,497.33 | ||
| Financial assets at fair value whose fluctuation is attributed to profit or loss for current period | |||
| Derivative financial assets | |||
| Notes receivable | 6,669,227.50 | 8,713,253.21 | |
| Accounts receivable | 53,851,989.56 | 40,853,861.26 | |
| Receivable financing | |||
| Prepayment | 3,640,841.35 | 1,013,250.66 | |
| Other receivables | 319,948,024.10 | 154,756,949.21 | |
| Including: Interest receivable | |||
| Dividends receivable | 1,050,356.92 | ||
| Inventories | 115,388,174.42 | 116,010,332.72 | |
| Assets held for sale | |||
| Non-current assets maturing within one year | |||
| Other current assets | 120,750,519.60 | 182,331,726.62 | |
| Total current assets | 822,429,556.88 | 628,936,774.32 | |
| Non-current assets: | |||
| Debt investment | |||
| Available-for-sale financial assets | 117,733,027.78 | ||
| Other debt investment | |||
| Held-to-maturity investments | |||
| Long-term receivables | 133,365,442.79 | 132,003,607.99 | |
| Long-term equity investments | 845,611,221.03 | 795,948,021.03 | |
| Other equity investment | 93,257,774.18 | ||
| Other non-current financial assets |
| Item | Note | June 30, 2019 | December 31, 2018 |
| Investment properties | 79,330,499.95 | 82,357,348.39 | |
| Fixed assets | 7,778,573.36 | 5,108,388.24 | |
| Construction in progress | 2,901,726.40 | 2,804,766.05 | |
| Productive biological assets | |||
| Oil and gas assets | |||
| Right-of-use assets | |||
| Intangible assets | 10,517,443.71 | 10,991,616.43 | |
| Development expenditures | |||
| Goodwill | |||
| Long-term deferred expenses | 1,680,155.96 | 1,600,982.68 | |
| Deferred income tax assets | 940,809.20 | 940,809.20 | |
| Other non-current assets | |||
| Total non-current assets | 1,175,383,646.58 | 1,149,488,567.79 | |
| Total assets | 1,997,813,203.46 | 1,778,425,342.11 | |
| Current liabilities: | |||
| Short-term loans | 168,763,259.04 | 9,348,148.62 | |
| Transactional financial liabilities | |||
| Financial liabilities at fair value whose fluctuation is attributed to profit or loss for current period | |||
| Derivative financial liabilities | |||
| Notes payable | |||
| Accounts payable | 115,827,051.65 | 95,996,884.11 | |
| Receipt in advance | 2,917,232.30 | 19,890,459.82 | |
| Employee benefits payable | 1,677,269.79 | 9,208,635.04 | |
| Taxes and surcharges payable | 2,945,922.88 | 4,352,572.60 | |
| Other payables | 170,309,661.58 | 174,326,023.74 | |
| Including: Interest payable | |||
| Dividends payable | 1,032,818.86 | 1,032,818.86 | |
| Liabilities held for sale | |||
| Non-current liabilities maturing within one year | 2,700,000.00 | ||
| Other current liabilities | |||
| Total current liabilities | 462,440,397.24 | 315,822,723.93 | |
| Non-current liabilities: | |||
| Long-term loans | 1,489,984.87 | 1,489,984.87 | |
| Bonds payable | |||
| Including: preference shares | |||
| Perpetual bond | |||
| Lease liability | |||
| Long-term payables | 1,574,312.63 | 1,574,312.63 | |
| Long-term employee benefits payable | |||
| Estimated liabilities | |||
| Deferred income | |||
| Deferred income tax liabilities | 1,197,067.41 | 1,197,067.41 | |
| Other non-current liabilities | 520,000.00 | 520,000.00 | |
| Total non-current liabilities | 4,781,364.91 | 4,781,364.91 | |
| Total liabilities | 467,221,762.15 | 320,604,088.84 | |
| Owners' equity: | |||
| Share capital | 548,589,600.00 | 548,589,600.00 | |
| Other equity instruments | |||
| Including: preference shares | |||
| Perpetual bond | |||
| Capital reserves | 1,003,282,687.73 | 1,003,282,687.73 | |
| Less: treasury stock | |||
| Other comprehensive income | 61,931,524.73 | 12,396,555.80 | |
| Special reserves | |||
| Surplus reserves | 4,546,242.52 | 4,546,242.52 | |
| Undistributed profits | -87,758,613.67 | -110,993,832.78 | |
| Total owners' equity | 1,530,591,441.31 | 1,457,821,253.27 | |
| Total liabilities and owners' equity | 1,997,813,203.46 | 1,778,425,342.11 |
Legal representative: Zhang Min Financial director: Zhang Jianrong Financial manager: Zhao Lixin
Shang Gong Group Co., Ltd.Consolidated Statement of Incomes
| Item | Note | Six months ended June 30, 2019 | Six months ended June 30, 2018 |
| 1. Incomes | 1,621,983,029.80 | 1,494,794,413.27 | |
| Including: operating income | 1,621,983,029.80 | 1,494,794,413.27 | |
| Interest income | |||
| Premiums earned | |||
| Income from handling charges and commissions | |||
| 2. Costs | 1,561,811,938.83 | 1,371,859,619.62 | |
| Including: Operating Cost | 1,198,980,538.22 | 1,052,451,025.46 | |
| Interest expenses | |||
| Handling charges and commissions expenses | |||
| Surrender value | |||
| Net amount of compensation payout | |||
| Net amount withdrawn for insurance contract reserves | |||
| Policy dividend payment | |||
| Reinsurance costs | |||
| Taxes and surcharges | 6,298,212.90 | 5,160,231.67 | |
| Selling expenses | 176,161,929.09 | 147,600,554.52 | |
| General and administrative expenses | 121,131,457.00 | 108,118,771.87 | |
| R & D expenses | 50,364,765.95 | 46,437,804.54 | |
| Financial expenses | 8,875,035.67 | 12,091,231.56 | |
| Including: Interest expense | 10,871,565.30 | 6,107,454.56 | |
| Interest income | 1,968,344.40 | 2,498,914.91 | |
| Plus: Other income | 9,381,829.77 | 2,616,373.56 | |
| Investment income ("-" for losses) | 26,827,200.38 | 17,485,066.32 | |
| Including: income from investment in associates and joint ventures | -1,691,101.14 | ||
| Financial assets derecognised as a result of amortized cost ("-" for losses) | |||
| Foreign exchange gains ("-" for losses) | |||
| Net hedging income("-" for losses) | |||
| Gains from changes in fair value("-" for losses) | 4,441,599.00 | ||
| Credit impairment loss("-" for losses) | -5,101,160.00 | ||
| Losses from asset impairment ("-" for losses) | -923,010.98 | 350,484.13 | |
| Gains on disposal of assets ("-" for losses) | -54,610.64 | -571,141.92 | |
| 3. Operating profits ("-" for losses) | 94,742,938.50 | 142,815,575.74 | |
| Plus: non-operating | 1,425,209.20 | 3,355,954.72 | |
| Less: non-operating expenses | 388,816.97 | 955,572.93 | |
| 4. Total profits ("-" for total losses) | 95,779,330.73 | 145,215,957.53 | |
| Less: income tax expenses | 19,700,782.13 | 32,930,028.35 | |
| 5. Net profit ("-" for net loss) | 76,078,548.60 | 112,285,929.18 | |
| (1) Classified by operating sustainability | |||
| a. Net profit from continuing operations ("-" for losses) | 76,078,548.60 | 112,285,929.18 | |
| b. Net profit from discontinued operations ("-" for losses) | |||
| (2) Classified by ownership | |||
| a. Non-controlling interests | 70,652,950.10 | 100,161,346.50 | |
| b. Net profit attributable to owners of the parent company | 5,425,598.50 | 12,124,582.68 | |
| 6. Other comprehensive income (net, after tax) | -6,205,566.73 | -27,605,940.81 | |
| Other comprehensive income attributable to owners of the parent company (net, after tax) | -6,380,716.78 | -25,400,680.10 | |
| (1) Other comprehensive income cannot be reclassified to gains and losses later | 2,594,583.52 | 0.00 | |
| a. Changes in net liabilities or assets due to the remeasurement and redefinition of the benefit plan | |||
| b. The shares in other comprehensive income of the |
| Item | Note | Six months ended June 30, 2019 | Six months ended June 30, 2018 |
| investee that cannot be reclassified to gains and losses under the equity method | |||
| c. Changes in fair value of other equity instruments investment | 2,594,583.52 | ||
| d. Changes in the fair value of the company's own credit risk | |||
| (2) Other comprehensive income to be reclassified to gains and losses later | -8,975,300.30 | -25,400,680.10 | |
| a. The shares in other comprehensive income of the investee that can be reclassified to gains and losses under the equity method | |||
| b. Changes in fair value of other debt investments | |||
| c. Gains and losses from changes in fair value of available-for-sale financial assets | -11,535,229.13 | ||
| d. Reclassification of financial assets recognized in other comprehensive income | |||
| e. Gains and losses from the reclassification of the held-to-maturity investment to held-for-sale financial assets | |||
| f. Other debt investment credit impairment provisions | |||
| g. The effective portion of the gains and losses from cash flow hedging | |||
| h. Translation differences of financial statements | -8,975,300.30 | -13,865,450.97 | |
| i. Others | |||
| Other comprehensive income attributable to non-controlling shareholders (net, after tax) | 175,150.05 | -2,205,260.71 | |
| 7. Total comprehensive incomes | 69,872,981.87 | 84,679,988.37 | |
| Total comprehensive income attributable to owners of the parent company | 64,272,233.32 | 74,760,666.40 | |
| Total comprehensive income attributable to non-controlling shareholders | 5,600,748.55 | 9,919,321.97 | |
| 8. Earnings per share | |||
| (1) Basic earnings per share (yuan/share) | 0.1288 | 0.1826 | |
| (2) Diluted earnings per share (yuan/share) | 0.1288 | 0.1826 |
Legal representative: Zhang Min Financial director: Zhang Jianrong Financial manager: Zhao Lixin
Shang Gong Group Co., Ltd.Statement of Incomes
| Item | Note | Six months ended June 30, 2019 | Six months ended June 30, 2018 |
| 1. Operating income | 179,461,220.67 | 184,812,505.26 | |
| Less: Operating cost | 121,233,679.61 | 125,430,105.96 | |
| Tax and surcharges | 2,935,494.62 | 2,284,387.24 | |
| Selling expenses | 21,262,736.75 | 18,213,101.44 | |
| General and Administration expenses | 24,415,400.44 | 23,872,348.49 | |
| R & D expenses | 2,515,663.02 | 1,615,502.13 | |
| Finance expenses | 287,665.37 | 63,811.51 | |
| Including: Interest expense | 1,000,866.79 | 256,569.07 | |
| Interest income | 2,290,041.84 | 2,330,299.53 | |
| Impairment losses on assets | 3,557,000.00 | 524,688.70 | |
| Plus: Other income | 5,087,526.30 | 18,852,017.46 | |
| Investment income ("-" for losses) | |||
| Financial assets derecognised as a result of amortized cost ("-" for losses) | |||
| Net hedging income("-" for losses) | |||
| Gains from changes in fair value("-" for losses) | 4,441,599.00 | ||
| Credit impairment loss("-" for losses) | -8,983,378.64 | ||
| Losses from asset impairment ("-" for losses) | -1,388,117.84 |
| Item | Note | Six months ended June 30, 2019 | Six months ended June 30, 2018 |
| Gains on disposal of assets ("-" for losses) | -462.36 | 1,906.38 | |
| 2. Operating profits ("-" for losses) | 10,912,865.16 | 31,323,743.19 | |
| Plus: Non-operating income | 843,369.30 | 3,287,449.06 | |
| Less: Non-operating expenses | 202,527.84 | 571,580.19 | |
| 3. Total profits ("-" for total losses) | 11,553,706.62 | 34,039,612.06 | |
| Less: income tax expenses | 712,116.03 | ||
| 4. Net profit ("-" for net loss) | 10,841,590.59 | 34,039,612.06 | |
| (1). Net profit from continuing operations ("-" for losses) | 10,841,590.59 | 34,039,612.06 | |
| (2). Net profit from discontinued operations ("-" for losses) | |||
| 5. Other comprehensive income (net, after tax) | 2,594,583.52 | -11,535,229.13 | |
| (1) Other comprehensive income cannot be reclassified to gains and losses later | 2,594,583.52 | 0.00 | |
| a. Changes in net liabilities or assets due to the remeasurement and redefinition of the benefit plan | |||
| b. The shares in other comprehensive income of the investee that cannot be reclassified to gains and losses under the equity method | |||
| c. Changes in fair value of other equity instruments investment | 2,594,583.52 | ||
| d. Changes in the fair value of the company's own credit risk | |||
| (2) Other comprehensive income to be reclassified to gains and losses later | 0.00 | -11,535,229.13 | |
| a. The shares in other comprehensive income of the investee that can be reclassified to gains and losses under the equity method | |||
| b. Changes in fair value of other debt investments | |||
| c. Gains and losses from changes in fair value of available-for-sale financial assets | -11,535,229.13 | ||
| d. Reclassification of financial assets recognized in other comprehensive income | |||
| e. Gains and losses from the reclassification of the held-to-maturity investment to held-for-sale financial assets | |||
| f. Other debt investment credit impairment provisions | |||
| g. The effective portion of the gains and losses from cash flow hedging | |||
| h. Translation differences of financial statements | |||
| i. Others | |||
| 6. Total comprehensive incomes | 13,436,174.11 | 22,504,382.93 | |
| 7. Earnings per share | |||
| (1) Basic earnings per share (yuan/share) | |||
| (2) Diluted earnings per share (yuan/share) |
Legal representative: Zhang Min Financial director: Zhang Jianrong Financial manager: Zhao Lixin
Shang Gong Group Co., Ltd.Consolidated Statement of Cash Flows
| Item | Note | Six months ended June 30, 2019 | Six months ended June 30, 2018 |
| 1. Cash flows from operating activities: | |||
| Cash received from sale of goods and provision of services | 1,644,797,923.74 | 1,468,995,000.92 | |
| Net increase in customer bank deposits and placement from banks and other financial institutions |
| Item | Note | Six months ended June 30, 2019 | Six months ended June 30, 2018 |
| Net increase in borrowings from central bank | |||
| Net increase in loans from other financial institutions | |||
| Premiums received from original insurance contracts | |||
| Net cash received from reinsurance business | |||
| Net increase in deposits and investments from policyholders | |||
| Cash received from interest, handling charges and commissions | |||
| Net increase in loans from banks and other financial institutions | |||
| Net capital increase in repurchase business | |||
| Net cash received from acting trading securities | |||
| Refunds of taxes and surcharges | 52,454,537.10 | 24,524,599.65 | |
| Cash received from other operating activities | 31,251,303.36 | 20,025,299.88 | |
| Sub-total of cash inflows from operating activities | 1,728,503,764.20 | 1,513,544,900.45 | |
| Cash paid for goods purchased and services received | 1,206,450,836.03 | 1,000,221,408.15 | |
| Net increase in loans and advances to customers | |||
| Net increase in deposits in central bank and other banks and financial institutions | |||
| Cash paid for original insurance contract claims | |||
| Net increase in financial assets held for trading purposes | |||
| Net increase in funds dismantled | |||
| Cash paid for interests, handling charges and commissions | |||
| Cash paid for policy dividends | |||
| Cash paid to and on behalf of employees | 414,334,280.82 | 359,869,785.40 | |
| Cash paid for taxes and surcharges | 65,271,930.62 | 66,300,639.21 | |
| Cash paid for other operating activities | 149,457,707.92 | 144,856,222.44 | |
| Sub-total of cash outflows from operating activities | 1,835,514,755.39 | 1,571,248,055.20 | |
| Net cash flows from operating activities | -107,010,991.19 | -57,703,154.75 | |
| 2. Cash flows from investing activities: | |||
| Cash inflow from divestment | 538,317,344.85 | 415,980,156.89 | |
| Cash inflow from investment incomes | 2,005,711.20 | 1,290,784.50 | |
| Cash gain from disposal of fixed assets, intangible assets, and other long-term investment | 327,430.15 | 497,493.66 | |
| Cash inflow from disposal of subsidiaries and other operating units | |||
| Cash received from other investing activities | |||
| Sub-total of cash inflows from investing activities | 540,650,486.20 | 417,768,435.05 | |
| Cash paid for acquisition of fixed assets, intangible assets and other long-term assets | 153,375,584.33 | 50,035,946.10 | |
| Cash paid for investments | 239,245,170.00 | 445,862,662.32 | |
| Net increase in pledge loans | |||
| Net cash paid to acquire subsidiaries and other business units | |||
| Cash paid for other investing activities | |||
| Sub-total of cash outflows from investing activities | 392,620,754.33 | 495,898,608.42 | |
| Net cash flows from investing activities | 148,029,731.87 | -78,130,173.37 | |
| 3. Cash flows from financing activities | |||
| Cash received from investors | 10,500,000.00 | ||
| Including: cash received by subsidiaries from investments by non-controlling shareholders | |||
| Cash received from loans | 427,182,843.42 | 137,855,600.00 | |
| Cash received from bonds issuance | |||
| Cash received from other financing activities | |||
| Sub-total of cash inflows from financing activities | 437,682,843.42 | 137,855,600.00 |
| Item | Note | Six months ended June 30, 2019 | Six months ended June 30, 2018 |
| Cash paid for debt repayments | 319,213,262.00 | 77,888,834.00 | |
| Cash paid for distribution of dividends and profits or payment of interest | 7,807,308.57 | 6,802,648.19 | |
| Including: dividends and profits paid to non-controlling shareholders by subsidiaries | |||
| Cash paid for other financing activities | 21,506,007.70 | ||
| Sub-total of cash outflows from financing activities | 348,526,578.27 | 84,691,482.19 | |
| Net cash flows from financing activities | 89,156,265.15 | 53,164,117.81 | |
| 4. Effect of fluctuation in exchange rate on cash and cash equivalents | 3,559,382.88 | -5,925,323.34 | |
| 5. Net increase in cash and cash equivalents | 133,734,388.71 | -88,594,533.65 | |
| Plus: beginning balance of cash and cash equivalents | 558,241,622.39 | 713,813,720.45 | |
| 6. Ending balance of cash and cash equivalents | 691,976,011.10 | 625,219,186.80 |
Legal representative: Zhang Min Financial director: Zhang Jianrong Financial manager: Zhao Lixin
Shang Gong Group Co., Ltd.Statement of Cash Flows
| Item | Note | Six months ended June 30, 2019 | Six months ended June 30, 2018 |
| 1. Cash flows from operating activities: | |||
| Cash received from sale of goods and provision of services | 152,131,095.83 | 197,477,098.52 | |
| Refunds of taxes and surcharges | 3,393,365.77 | 997,057.43 | |
| Cash received from other operating activities | 38,255,645.39 | 18,901,316.47 | |
| Sub-total of cash inflows from operating activities | 193,780,106.99 | 217,375,472.42 | |
| Cash paid for goods purchased and services received | 104,471,039.90 | 139,833,572.71 | |
| Cash paid to and on behalf of employees | 26,116,825.65 | 27,806,037.36 | |
| Cash paid for taxes and surcharges | 8,095,362.83 | 3,134,689.28 | |
| Cash paid for other operating activities | 244,043,956.11 | 53,107,805.94 | |
| Sub-total of cash outflows from operating activities | 382,727,184.49 | 223,882,105.29 | |
| Net cash flows from operating activities | -188,947,077.50 | -6,506,632.87 | |
| 2. Cash flows from investing activities: | |||
| Cash inflow from divestment | 272,427,018.55 | 376,654,041.82 | |
| Cash inflow from investment incomes | 3,056,068.12 | 1,472,034.50 | |
| Cash gain from disposal of fixed assets, intangible assets, and other long-term investment | 14,881.15 | 980.58 | |
| Cash inflow from disposal of subsidiaries and other operating units | |||
| Cash received from other investing activities | |||
| Sub-total of cash inflows from investing activities | 275,497,967.82 | 378,127,056.90 | |
| Cash paid for acquisition of fixed assets, intangible assets and other long-term assets | 255,840.76 | 192,643.35 | |
| Cash paid for investments | 258,745,170.00 | 408,033,790.00 | |
| Net cash paid to acquire subsidiaries and other business units | |||
| Cash paid for other investing activities | |||
| Sub-total of cash outflows from investing activities | 259,001,010.76 | 408,226,433.35 | |
| Net cash flows from investing activities | 16,496,957.06 | -30,099,376.45 | |
| 3. Cash flows from financing activities | |||
| Cash received from investors | |||
| Cash received from loans | 159,415,110.42 | ||
| Cash received from bonds issuance | |||
| Cash received from other financing activities | |||
| Sub-total of cash inflows from financing activities | 159,415,110.42 | 0.00 | |
| Cash paid for debt repayments | |||
| Cash paid for distribution of dividends and profits or payment of interest | 896,753.58 | ||
| Cash paid for other financing activities |
| Item | Note | Six months ended June 30, 2019 | Six months ended June 30, 2018 |
| Sub-total of cash outflows from financing activities | 896,753.58 | 0.00 | |
| Net cash flows from financing activities | 158,518,356.84 | 0.00 | |
| 4. Effect of fluctuation in exchange rate on cash and cash equivalents | 645.98 | 3,501.82 | |
| 5. Net increase in cash and cash equivalents | -13,931,117.62 | -36,602,507.50 | |
| Plus: beginning balance of cash and cash equivalents | 125,257,400.64 | 137,028,156.51 | |
| 6. Ending balance of cash and cash equivalents | 111,326,283.02 | 100,425,649.01 |
Legal representative: Zhang Min Financial director: Zhang Jianrong Financial manager: Zhao Lixin
Shang Gong Group Co., Ltd.Consolidated Statement of Changes in Owner’s Equity
| Item | Six months ended June 30, 2019 | ||||||||||||||
| Owners' equity attributable to the parent company | Minority equity | Total owners' equity | |||||||||||||
| Share capital | Other equity instruments | Capital reserves | Less: treasury stock | Other comprehensive income | Special reserves | Surplus reserves | General risk reserves | Undistributed profits | Capital reserves | Subtotal | |||||
| Preference shares | Perpetual bonds | Others | |||||||||||||
| 1. Previous year ending balance brought forward | 548,589,600.00 | 916,215,448.24 | -75,701,094.41 | 4,546,242.52 | 819,208,053.71 | 2,212,858,250.06 | 299,097,417.55 | 2,511,955,667.61 | |||||||
| Plus: accounting policy changes | 46,940,385.41 | 11,741,623.31 | 58,682,008.72 | 58,682,008.72 | |||||||||||
| Correction of previous-period accounting errors | |||||||||||||||
| Business combination involving entities under common control | |||||||||||||||
| Others | |||||||||||||||
| 2. Beginning balance of current year | 548,589,600.00 | 0.00 | 0.00 | 0.00 | 916,215,448.24 | 0.00 | -28,760,709.00 | 0.00 | 4,546,242.52 | 0.00 | 830,949,677.02 | 2,271,540,258.78 | 299,097,417.55 | 2,570,637,676.33 | |
| 3. Increase/ (decrease) for the current year ("-" for losses) | 0.00 | 0.00 | 0.00 | 0.00 | -634,773.46 | 0.00 | -6,380,716.78 | 0.00 | 0.00 | 0.00 | 70,652,950.10 | 63,637,459.86 | -10,662,703.64 | 52,974,756.22 | |
| (1) Total comprehensive incomes | -6,380,716.78 | 70,652,950.10 | 64,272,233.32 | 5,600,748.55 | 69,872,981.87 | ||||||||||
| (2) Investment/ (divestment) | 0.00 | 0.00 | 0.00 | 0.00 | -634,773.46 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | -634,773.46 | -16,263,452.19 | -16,898,225.65 | |
| a. Common shares from shareholders | 0.00 | ||||||||||||||
| b. Investment capital from the holders of other equity instruments | 0.00 | ||||||||||||||
| c. Amount of the share-based payment included in the owners' equity | 0.00 | ||||||||||||||
| d. Others | -634,773.46 | -634,773.46 | -16,263,452.19 | -16,898,225.65 | |||||||||||
| (3) Distribution of profits | |||||||||||||||
| a. Surplus reserves | |||||||||||||||
| b. General risk reserves | |||||||||||||||
| Item | Six months ended June 30, 2019 | ||||||||||||||
| Owners' equity attributable to the parent company | Minority equity | Total owners' equity | |||||||||||||
| Share capital | Other equity instruments | Capital reserves | Less: treasury stock | Other comprehensive income | Special reserves | Surplus reserves | General risk reserves | Undistributed profits | Capital reserves | Subtotal | |||||
| Preference shares | Perpetual bonds | Others | |||||||||||||
| c. Distribution to owners or shareholders | |||||||||||||||
| d. Others | |||||||||||||||
| (4) Internal transfer of owners' equity | |||||||||||||||
| a. Capital reserve turn to stock equity | |||||||||||||||
| b. Surplus reserve turn to stock equity | |||||||||||||||
| c. Surplus reserve to recover loss | |||||||||||||||
| d. Defined benefit plans change amount to carry forward retained earnings | |||||||||||||||
| e. Other comprehensive income carry forward retained earnings | |||||||||||||||
| f. Others | |||||||||||||||
| (5) Special reserves | |||||||||||||||
| a. Appropriation for current period | |||||||||||||||
| b. Use in current period | |||||||||||||||
| (6) Others | |||||||||||||||
| 4. Ending balance | 548,589,600.00 | 915,580,674.78 | -35,141,425.78 | 4,546,242.52 | 901,602,627.12 | 2,335,177,718.64 | 288,434,713.91 | 2,623,612,432.55 | |||||||
| Item | Six months ended June 30, 2018 | ||||||||||||||
| Owners' equity attributable to the parent company | Minority equity | Total owners' equity | |||||||||||||
| Share capital | Other equity instruments | Capital reserves | Less: treasury stock | Other comprehensive income | Special reserves | Surplus reserves | General risk reserves | Undistributed profits | Capital reserves | Subtotal | |||||
| Preference shares | Perpetual bonds | Others | |||||||||||||
| 1. Previous year ending balance brought forward | 548,589,600.00 | 972,000,595.56 | -72,163,452.90 | 4,546,242.52 | 692,241,691.51 | 2,145,214,676.69 | 311,216,783.45 | 2,456,431,460.14 | |||||||
| Item | Six months ended June 30, 2018 | ||||||||||||||
| Owners' equity attributable to the parent company | Minority equity | Total owners' equity | |||||||||||||
| Share capital | Other equity instruments | Capital reserves | Less: treasury stock | Other comprehensive income | Special reserves | Surplus reserves | General risk reserves | Undistributed profits | Capital reserves | Subtotal | |||||
| Preference shares | Perpetual bonds | Others | |||||||||||||
| Plus: accounting policy changes | |||||||||||||||
| Correction of previous-period accounting errors | |||||||||||||||
| Business combination involving entities under common control | |||||||||||||||
| Others | |||||||||||||||
| 2. Beginning balance of current year | 548,589,600.00 | 0.00 | 0.00 | 0.00 | 972,000,595.56 | 0.00 | -72,163,452.90 | 0.00 | 4,546,242.52 | 0.00 | 692,241,691.51 | 2,145,214,676.69 | 311,216,783.45 | 2,456,431,460.14 | |
| 3. Increase/ (decrease) for the current year ("-" for losses) | 0.00 | 0.00 | 0.00 | 0.00 | -5,832,696.23 | 0.00 | -25,400,680.10 | 0.00 | 0.00 | 0.00 | 100,161,346.50 | 68,927,970.17 | 9,919,321.97 | 78,847,292.14 | |
| (1) Total comprehensive incomes | -25,400,680.10 | 100,161,346.50 | 74,760,666.40 | 9,919,321.97 | 84,679,988.37 | ||||||||||
| (2) Investment/ (divestment) | 0.00 | 0.00 | 0.00 | 0.00 | -5,832,696.23 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | -5,832,696.23 | 0.00 | -5,832,696.23 | |
| a. Common shares from shareholders | |||||||||||||||
| b. Investment capital from the holders of other equity instruments | |||||||||||||||
| c. Amount of the share-based payment included in the owners' equity | |||||||||||||||
| d. Others | -5,832,696.23 | -5,832,696.23 | -5,832,696.23 | ||||||||||||
| (3) Distribution of profits | |||||||||||||||
| a. Surplus | |||||||||||||||
| Item | Six months ended June 30, 2018 | ||||||||||||||
| Owners' equity attributable to the parent company | Minority equity | Total owners' equity | |||||||||||||
| Share capital | Other equity instruments | Capital reserves | Less: treasury stock | Other comprehensive income | Special reserves | Surplus reserves | General risk reserves | Undistributed profits | Capital reserves | Subtotal | |||||
| Preference shares | Perpetual bonds | Others | |||||||||||||
| reserves | |||||||||||||||
| b. General risk reserves | |||||||||||||||
| c. Distribution to owners or shareholders | |||||||||||||||
| d. Others | |||||||||||||||
| (4) Internal transfer of owners' equity | |||||||||||||||
| a. Capital reserve turn to stock equity | |||||||||||||||
| b. Surplus reserve turn to stock equity | |||||||||||||||
| c. Surplus reserve to recover loss | |||||||||||||||
| d. Defined benefit plans change amount to carry forward retained earnings | |||||||||||||||
| e. Other comprehensive income carry forward retained earnings | |||||||||||||||
| f. Others | |||||||||||||||
| (5) Special reserves | |||||||||||||||
| a. Appropriation for current period | |||||||||||||||
| b. Use in current period | |||||||||||||||
| (6) Others | |||||||||||||||
| 4. Ending balance | 548,589,600.00 | 0.00 | 0.00 | 0.00 | 966,167,899.33 | 0.00 | -97,564,133.00 | 0.00 | 4,546,242.52 | 0.00 | 792,403,038.01 | 2,214,142,646.86 | 321,136,105.42 | 2,535,278,752.28 | |
Legal representative: Zhang Min Financial director: Zhang Jianrong Financial manager: Zhao Lixin
Shang Gong Group Co., Ltd.Statement of Changes in Owner’s Equity
| Item | Six months ended June 30, 2019 | ||||||||||
| Share capital | Other equity instruments | Capital reserves | Less: treasury stock | Other comprehensive income | Special reserves | Surplus reserves | Undistributed profits | Total owners' equity | |||
| Preference shares | Perpetual bonds | Others | |||||||||
| 1. Previous year ending balance brought forward | 548,589,600.00 | 1,003,282,687.73 | 12,396,555.80 | 4,546,242.52 | -110,993,832.78 | 1,457,821,253.27 | |||||
| Plus: accounting policy changes | 46,940,385.41 | 12,393,628.52 | 59,334,013.93 | ||||||||
| Correction of previous-period accounting errors | 0.00 | ||||||||||
| Others | 0.00 | ||||||||||
| 2. Beginning balance of current year | 548,589,600.00 | 0.00 | 0.00 | 0.00 | 1,003,282,687.73 | 0.00 | 59,336,941.21 | 0.00 | 4,546,242.52 | -98,600,204.26 | 1,517,155,267.20 |
| 3. Increase/(decrease) for the current year ("-" for losses) | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 2,594,583.52 | 0.00 | 0.00 | 10,841,590.59 | 13,436,174.11 |
| (1) Total comprehensive incomes | 2,594,583.52 | 10,841,590.59 | 13,436,174.11 | ||||||||
| (2) Investment/ (divestment) | |||||||||||
| a. Common shares from shareholders | |||||||||||
| b. Investment capital from the holders of other equity instruments | |||||||||||
| c. Amount of the share-based payment included in the owners' equity | |||||||||||
| d. Others | |||||||||||
| (3) Distribution of profits | |||||||||||
| a. Surplus reserves | |||||||||||
| b. Distribution to owners or shareholders | |||||||||||
| c. Others | |||||||||||
| (4) Internal transfer of owners' equity | |||||||||||
| a. Capital reserve turn to stock equity | |||||||||||
| b. Surplus reserve turn to stock equity | |||||||||||
| c. Surplus reserve to recover loss | |||||||||||
| d. Defined benefit plans change amount to carry forward retained earnings | |||||||||||
| e. Other comprehensive income carry forward retained earnings | |||||||||||
| f. Others | |||||||||||
| (5) Special reserves | |||||||||||
| a. Appropriation for report period | |||||||||||
| b. Use in report period | |||||||||||
| (6) Others | |||||||||||
| 4. Ending balance | 548,589,600.00 | 1,003,282,687.73 | 61,931,524.73 | 4,546,242.52 | -87,758,613.67 | 1,530,591,441.31 | |||||
| Item | Six months ended June 30, 2018 | ||||||||||
| Share capital | Other equity instruments | Capital reserves | Less: treasury stock | Other comprehensive income | Special reserves | Surplus reserves | Undistributed profits | Total owners' equity | |||
| Preference shares | Perpetual bonds | Others | |||||||||
| 1. Previous year ending balance brought forward | 548,589,600.00 | 1,003,282,687.73 | 15,711,472.03 | 4,546,242.52 | -143,892,809.85 | 1,428,237,192.43 | |||||
| Plus: accounting policy changes | 0.00 | ||||||||||
| Correction of previous-period accounting errors | 0.00 | ||||||||||
| Others | 0.00 | ||||||||||
| 2. Beginning balance of current year | 548,589,600.00 | 0.00 | 0.00 | 0.00 | 1,003,282,687.73 | 0.00 | 15,711,472.03 | 0.00 | 4,546,242.52 | -143,892,809.85 | 1,428,237,192.43 |
| 3. Increase/(decrease) for the current year ("-" for losses) | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | -11,535,229.13 | 0.00 | 0.00 | 34,039,612.06 | 22,504,382.93 |
| (1) Total comprehensive incomes | -11,535,229.13 | 34,039,612.06 | 22,504,382.93 | ||||||||
| (2) Investment/ (divestment) | |||||||||||
| a. Common shares from shareholders | |||||||||||
| b. Investment capital from the holders of other equity instruments | |||||||||||
| c. Amount of the share-based payment included in the owners' equity | |||||||||||
| d. Others | |||||||||||
| (3) Distribution of profits | |||||||||||
| a. Surplus reserves | |||||||||||
| b. Distribution to owners or shareholders | |||||||||||
| c. Others | |||||||||||
| (4) Internal transfer of owners' equity | |||||||||||
| a. Capital reserve turn to stock equity | |||||||||||
| b. Surplus reserve turn to stock equity | |||||||||||
| c. Surplus reserve to recover loss | |||||||||||
| d. Defined benefit plans change amount to carry forward retained earnings | |||||||||||
| e. Other comprehensive income carry forward retained earnings | |||||||||||
| f. Others | |||||||||||
| (5) Special reserves | |||||||||||
| a. Appropriation for report period | |||||||||||
| b. Use in report period | |||||||||||
| (6) Others | |||||||||||
| 4. Ending balance | 548,589,600.00 | 0.00 | 0.00 | 0.00 | 1,003,282,687.73 | 0.00 | 4,176,242.90 | 0.00 | 4,546,242.52 | -109,853,197.79 | 1,450,741,575.36 |
Legal representative: Zhang Min Financial director: Zhang Jianrong Financial manager: Zhao Lixin
3. Company Basic Information
（1）Company Profile
Shang Gong Group Co., Ltd.( hereinafter referred to as "SGG" or "the Company"), a joint stocklimited company with publicly issued A & B shares on the Shanghai Stock Exchange, is the first listedcompany in the sewing machinery industry of China. The Company was incorporated in April 1994. Theregistration number has changed to 91310000132210544K (Unified social credit code) in 2016. Theorganizational form of the Company is a joint stock limited company (a Sino-foreign joint venture and alisted company) and the registered capital amounts to 548,589,600.00 yuan. The registered address is RoomA-D, 12th Floor, Orient Mansion, No. 1500, Century Avenue, China (Shanghai) Pilot Free Trade Zone andthe head office is located in No. 1566 New Jinqiao Road, Pudong New Area, Shanghai. The legalrepresentative is Mr. Zhang Min.On 22nd May 2006, it was decided on the General Meeting on equity division reform by the Companythat: the non-tradable equity stockholders pay partially their shares to all the tradable equity shareholders ata ratio of 10 to 6 as consideration of getting tradable rights. After the above consideration of share donation,the total number of shares remains unchanged, but consequently the equity structure has changed. As at31st December 2013, there were 448,886,777 shares in total.On 28th February 2014, CSRC approved the non-public offering of A shares of the Company underthe Official Reply to the Approval of Non-public Offering of Shares of Shang Gong Group Co., Ltd. ([2014]No. 237). The number of shares issued was 99,702,823.00 and the total number of share capital after theissue was 548,589,600.00. The Company handled equity registration and escrow formalities with the CSDCShanghai Branch; the corresponding registered capital was changed to RMB 548,589,600.00 yuan and hadbeen verified by the Verification Report (PCPAR [2014] No.111126) issued by BDO CHINA Shu Lun PanCertified Public Accountants LLP on 26th March 2014.
On 29th December 2016, Pudong SASAC, the original controlling shareholder and actual controller ofthe Company, had sold 60.00 million A shares of the Company to Shanghai Puke Flyman Investment Co.,Ltd. which is the wholly-owned subsidiary of Shanghai Pudong Science and Technology Investment Co.,Ltd. China Securities Depository and Clearing Co., Ltd. has issued a "transfer registration confirmation" onthe same day.
After the transfer, PKFR held A shares accounted for 10.94% of the total share capital of the Company,which is the largest shareholder of the Company; Pudong SASAC held A shares accounted for 8.27%,which is the second largest shareholder of the Company. After the completion of the equity transfer, theCompany has changed to a listed company with no controlling shareholder and no actual controller.
As of June 30, 2019, the Company’s total share capital is 548,589,600.00, including 548,589,600shares with no restrictive terms, accounting for 100.00% of the total number of shares.
The Company belongs to special equipment manufacturing industry; main operating activities of theCompany are: production and sales of sewing equipment and intelligent equipment.
According to the resolution of the 16
th
meeting of the 8
th
board of directors, the financial statementswere approved for disclosure by all directors of the Company on August 29, 2019.
（2）Scope of the Consolidated Financial Statements
| Name of subsidiary |
| 1. Shanghai Shanggong & Butterfly Sewing Machine Co., Ltd. |
| 2. DAP (Shanghai) Co., Ltd. |
| 3. Shanghai SMPIC IMPORT & EXPORT CO., LTD. |
| 4. Shanghai SGSB Electronics Co., Ltd. |
| Name of subsidiary |
| 5. Shanghai SGSB Asset Management Co., Ltd. |
| 6. Shanghai Sewing Construction Property Co., Ltd. |
| 7. Dürkopp Adler Aktiengesellschaft |
| 8.Zhejiang ShangGong GEMSY Co., Ltd. |
| 9.Shanghai Shensy Enterprise Development Co., Ltd. |
| 10.Shanghai ShangGong Financial Leasing Co., Ltd. |
| 11. PFAFF Industrial Sewing Machine (Zhangjiagang) Co., Ltd. |
| 12.DAP (Vietnam) Co., Ltd. |
| 13.ShangGong Sewing Equipment (Zhejiang) Co., Ltd. |
| 14.Dürkopp Adler Manufacturing(Shanghai) Co.,Ltd. |
| 15.Tianjin Richpeace |
See “Note 8 Changes in the scope of consolidation" and “Note 9 Equity in other subjects" for detailsof the scope of consolidated financial statements in the current year and the changes thereof.
4. Preparation Basis of Financial Statements
(1) Preparation Basis of Financial Statements
The Company prepares the financial statements based on going concern, according to the transactionsand events actually occurred and in accordance with the Accounting Standards for Business Enterprises –Basic Standard and various specific accounting standards, application guidance and interpretations foraccounting standards for business enterprises and other relevant provisions (hereinafter collectively referredto as “Accounting Standards for Business Enterprises”) promulgated by the Ministry of Finance anddisclosure provisions of the Rules for the Information Disclosure and Compilation of Companies PubliclyIssuing Securities No. 15 – General Rules on Financial Reports of the China Securities RegulatoryCommission.
(2) Going Concern
The Company has going-concern ability within 12 months as of the end of the report period and hasno matters or situations that may lead to serious doubts about the Company’s going-concern ability.
5. Significant Accounting Policies and Accounting Estimates
Specific accounting policies and accounting estimates:
The following disclosure has covered the Company’s specific accounting policies and accountingestimates prepared according to the actual production and operation characteristics.
(1) Statement on compliance with Accounting Standards for Business Enterprises
The financial statements prepared by the Company meet the requirements of the Accounting Standardsfor Business Enterprises and truly and completely reflect the Company’s financial position, operatingresults, cash flows and other related information in the report period.
(2) Accounting period
The accounting year is from 1
st
Januaryto 31
st
December in calendar year.
(3) Operating cycle
The Company’s operating cycle is 12 months.
(4) Functional currency
The Company adopts RMB as its functional currency.
(5) Accounting methods of business combinations under common control and not under commoncontrolBusiness combinations under common control: Assets and liabilities acquired from businesscombinations by the Company are measured at book value of assets and liabilities (including goodwillformed from the purchase of the cquire by the ultimate controller) in the consolidated financial statementsof the ultimate controller. Stock premium in the capital reserve should be adjusted according to thedifference between the book value of net asset acquired from the combinations and that of consideration (ortotal face value of the shares issued) paid. In case the stock premium in the capital reserve is not enough,the retained earnings need to be adjusted.Business combinations not under common control: Assets paid for consideration and liabilitiesincurred or borne by the Company on the acquisition date shall be measured at their fair values. Thedifference between the fair value and the book value should be included in the current profit and loss. TheCompany shall recognize the difference of the combination costs in excess of the fair value of theidentifiable net assets acquired from the cquire as goodwill. The Company shall include the difference ofthe combination costs in short of the fair value of the identifiable net assets acquired from the cquire inthe current profit and loss after review.Intermediary service charges such as audit fee, legal service fee, appraisal and consultancy fee paid forbusiness combinations and other directly relevant expenses are included in the current profit and loss whenincurred; the transaction costs for the issuance of equity securities shall be used to offset equities.
(6) Preparation Methods of Consolidated Financial Statements
1. Scope of consolidation
The scope of consolidation of the Company’s consolidated financial statements is recognized based onthe control. All subsidiaries (including the divisible part of the investee controlled by the Company) shouldbe included in the consolidated financial statements.
2. Consolidation procedure
The Company prepares consolidated financial statements based on its own financial statements andfinancial statements of its subsidiaries according to other relevant materials. When the Company preparesits consolidated financial statements, it shall regard the whole enterprise group as an accounting entity toreflect the overall financial position, operating results and cash flows of the enterprise group according tothe requirements for recognition, measurement and presentation of the relevant Accounting Standards forBusiness Enterprises and the uniform accounting policies.
Accounting policies and accounting periods adopted by all subsidiaries included in the consolidationscope of the consolidated financial statements should be consistent with those of the Company. Ifaccounting policies and accounting periods adopted by all subsidiaries are inconsistent with those of theCompany, in the preparation of the consolidated financial statements, necessary adjustments shall be madeaccording to the accounting policies and accounting periods of the Company. For the subsidiaries acquiredthrough business combination not under common control, adjustments to their financial statements shall bemade based on the fair values of net identifiable assets on the acquisition date. For the subsidiaries acquiredthrough business combination not under common control, adjustments to their financial statements shall bemade based on the fair values of their assets and liabilities (including goodwill from acquisition of thesubsidiaries by the ultimate controller) in the financial statements of the ultimate controller.
The share of owner’s equity, net profits and losses in the current year and comprehensive income inthe current year of subsidiaries attributable to minority shareholders should separately presented under theitem of owner’s equity of the Consolidated Balance Sheet, the item of net profit of the ConsolidatedIncome Statement and the item of total comprehensive income. The difference formed by the loss in the
current year shared by minority shareholders of the subsidiaries in excess of the share of minorityshareholders in the owner’s equity at the beginning of the year of the subsidiaries should be used to offsetthe minority equity.
（1）Increase in subsidiaries or business
In the report period, if the Company increased subsidiaries or business from business combinationsunder common control, then the beginning amount of the Consolidated Balance Sheet should be adjusted;the incomes, expenses and profits from the combinations of the subsidiaries and business from thebeginning of the current year to the end of the reporting period shall be included in the ConsolidatedIncome Statement; cash flows from the combinations of the subsidiaries and business from the beginning ofthe current year to the end of the reporting period shall be included in the Consolidated Cash FlowStatement. At the same time, the Company should adjust the relevant items of the comparative statementsand deem that the reporting entity already exists when the ultimate controller starts its control.
Where the Company can control the investee under common control from additional investments, itshould deem that parties involved in the combination have make adjustments at the current state when theultimate controller starts its control. Equity investments held before the Company controls the cquire, therelevant profit and loss recognized during the period from the later of the date when the Company obtainsthe original equity and the date when the acquirer and the cquire are under common control, othercomprehensive income and changes in other net assets shall be used to offset the retained earnings at thebeginning of the year or the current profit and loss in the period of the comparative statements.
In the report period, if the Company increased subsidiaries or business from business combinations notunder common control, then the beginning amount of the Consolidated Balance Sheet should not beadjusted; the incomes, expenses and profits from the subsidiaries and business from the acquisition date tothe end of the report period shall be included in the Consolidated Income Statement; cash flows from thesubsidiaries and business from the acquisition date to the end of the reporting period shall be included inthe Consolidated Cash Flow Statement.
Where the Company can control the investee not under common control from additional investments,it shall re-measure equity of the cquire held before the acquisition date at the fair value of such equity onthe acquisition date and include the difference of the fair value and book value in the investment income inthe current year. Where equity of the cquire held before the acquisition date involves in othercomprehensive income accounted for under equity method and other changes in owner’s equity other thannet profit and loss, other comprehensive income and profit distribution, the relevant other comprehensiveincome and other changes in owner’s equity shall be transferred to investment income in the current yearwhich the acquisition date falls in, except for other comprehensive income from changes arising fromre-measurement of net liabilities or net assets of defined benefit plan.
（2）Disposal of subsidiaries or business
①General treatment methods
In the reporting period, if the Company disposed subsidiaries or business, then the incomes, expensesand profits from the subsidiaries and business from the beginning of the year to the disposal date shall beincluded in the Consolidated Income Statement; cash flows from the combinations of the subsidiaries andbusiness from the beginning of the year to the disposal date shall be included in the Consolidated CashFlow Statement.
When the Company losses the control over the original subsidiary due to disposal of partial equityinvestments or other reasons, the remaining equity investments after the disposal will be re-measured at thefair value at the date of loss of the control. The difference of total amount of the consideration fromdisposal of equities plus the fair value of the remaining equities less the shares calculated at the original
shareholding ratio in net assets of the original subsidiary which are continuously calculated as of theacquisition date is included in the investment income of the period at the loss of control. Othercomprehensive income associated with the original equity investments of the subsidiary and other changesin owner’s equity other than net profit and loss, other comprehensive income and profit distribution aretransferred into investment income in the current year when the control is lost, except for othercomprehensive income from changes arising from re-measurement of net liabilities or net assets of definedbenefit plan.
If other investors increase their shareholdings due to the increase in capital of their subsidiaries andlose control, they shall be accounted for in accordance with the above principles.
②Disposal of subsidiary by stages
Where the Company disposes the equity investments in subsidiary through multiple transactions andby stages until it loses the control, if the effect of the disposal on the terms and conditions of alltransactions of equity investments in subsidiary and economic effect meet one or more of the followingcircumstance, it usually indicates that the multiple transactions should be accounted for as a package deal:
i. These transactions are concluded at the same time or under the consideration of mutual effect;
ii. These transactions as a whole can reach a complete business results;
iii. The occurrence of a transaction depends on the occurrence of at least one other transaction;
ⅳ. A single transaction is uneconomical but it is economical when considered together with othertransactions.
Where various transactions of disposal of equity investments in subsidiaries until loss of the controlbelong to a package deal, accounting treatment shall be made by the Company on the transactions as atransaction to dispose subsidiaries and lose the control; however, the difference between each disposal costand net asset share in the subsidiaries corresponding to each disposal of investments before loss of thecontrol should be recognized as other comprehensive income in the consolidated financial statements andshould be transferred into the current profit or loss at the loss of the control.
Where various transactions of disposal of equity investments in subsidiaries until loss of the control donot belong to a package deal, before the loss of the control, accounting treatment shall be made accordingto the relevant policies for partial disposal of equity investments in the subsidiary without losing control; atthe loss of the control, accounting treatment shall be made according to general treatment methods fordisposal of subsidiaries.
（3）Purchase of minority interest of subsidiaries
The difference between long-term equity investments newly acquired by the Company throughpurchase of minority interest and the subsidiary’s identifiable net assets attributable to the Companycalculated continuously from the acquisition date (or the combination date) in accordance with the newlyincreased shareholding ratio shall be charged against stock premium within capital reserves in theconsolidated balance sheet; when stock premium within capital reserves is insufficient to offset, theretained earnings shall be adjusted.
（4）Partial disposal of equity investments in the subsidiary without losing control
The difference between the proceeds from partial disposal of equity investments in the subsidiary andthe share of identifiable net assets of the subsidiary attributable to the Company which are calculatedcontinuously from the acquisition date (or the combination date) and which are corresponding to thedisposal of long-term equity investments without losing control shall be charged against stock premiumwithin capital reserves in the consolidated balance sheet; when stock premium within capital reserves isinsufficient to offset, the retained earnings shall be adjusted.
(7) Classification of joint venture arrangements and accounting methods for joint operationNot applicable.
(8) Determination of cash and cash equivalents
Cash equivalents refer to short-term (usually due within three months from the date of purchase),highly liquid investments that are readily convertible into known amounts of cash and which are subject toan insignificant risk of changes in value.When preparing the statement of cash flow, the Company's cash on hand and deposits that can be usedfor payment at any time are recognized as cash. An investment with a short maturity (expiring within threemonths from the date of purchase), strong liquidity, easy conversion into known cash, and a small risk ofchange in value is determined as a cash equivalent.
(9) Foreign currency transactions and translation of foreign currency statements
1. Foreign currency transactions
Foreign currency transactions are, on initial recognition, translated to RMB at the spot exchange ratesat the dates of the transactions.
The balance of foreign currency monetary items is adjusted and translated into functional currency atbalance sheet date using the spot exchange rate. Regarding the year-end differences of translation in foreigncurrency, except those special borrowing accounts under the acquisition, building or production of assets tobe capitalized are capitalized and accounted into related assets cost, all the other differences are accountedinto current profits and losses. The foreign currency non-monetary items at historical cost are translatedusing the spot exchange rate. And the foreign currency non-monetary items at fair value are adjusted andtranslated into measurement currency at adoption date of fair value using the spot exchange rate. Thedifference of translation between different currencies is accounted into current profits and losses or capitalreserves.
2. Translation of foreign currency statements
The assets and liabilities of foreign operation are translated to RMB at the spot exchange rate at thebalance sheet date. The equity items, excluding “Retained earning”, are translated to RMB at the spotexchange rates at the transaction dates. The income and expenses of foreign operation are translated toRMB at the spot exchange rates or the rates that approximate the spot exchange rates at the transactiondates. The resulting exchange differences are recognized in a separate component of equity.
Upon entire/partial disposal of a foreign operation, the entire/partial cumulative amount of theexchange differences recognized in equity which relates to that foreign operation is transferred to profit orloss in the period in which the disposal occurs.
(10) Financial Instruments
A. Classification of financial instruments
According to the business model of the Company's management of financial assets and the contractualcash flow characteristics of financial assets, financial assets are classified at the initial recognition as:
financial assets measured at amortized cost, financial assets (debt instruments) measured at fair value andwhose changes are included in other comprehensive income, and Financial assets measured at fair valuethrough profit or loss.
The business model, which is based on the collection of contractual cash flow and the contractual cashflow is only the payment of the principal and the interest based on the outstanding principal amount, isclassified as financial assets measured at amortized cost; the business model, which is based on thecollection of contractual cash flows and the sale of the financial assets and the contractual cash flows are
only paid for the principal and interest based on the outstanding principal amount, is classified as financialassets (debt instruments) measured at fair value and whose changes are included in other comprehensiveincome; Other financial assets other than these are classified as financial assets measured at fair valuethrough profit or loss.For non-trading equity instrument investments, the Company determines at the initial recognitionwhether it is designated as a financial asset (equity instrument) that is measured at fair value and whosechanges are included in other comprehensive income.B. Confirmation basis and measurement method of financial instruments
（1）Financial assets measured at amortized cost
Financial assets measured at amortized cost include notes receivable, accounts receivable, otherreceivables, long-term receivables, and debt investment, which are initially measured at fair value, andrelated transaction expenses are included in the initial recognition amount; Accounts receivable that do notcontain significant financing components and accounts receivable that the Company has decided not toconsider for a financing component of no more than one year are initially measured at the contractualtransaction price.Interest calculated by the effective interest method during the period of holding is included in thecurrent profit and loss.When recovering or disposing, the difference between the price obtained and the book value of thefinancial asset is included in the current profit and loss.
（2）Financial assets (debt instruments) measured at fair value and whose changes are included inother comprehensive income
Financial assets (debt instruments) measured at fair value and whose changes are included in othercomprehensive income includes receivables financing, other debt investment, etc., is initially measured atfair value, and related transaction costs are included in the initial recognition amount.
The financial assets are subsequently measured at fair value. Changes in fair value are included inother comprehensive income except for interest, impairment losses or gains and exchange gains and lossescalculated using the effective interest method.
When the recognition is terminated, the accumulated gain or loss previously recognised in othercomprehensive income is transferred from other comprehensive income and recognised in profit or loss.
（3）Financial assets (equity instruments) measured at fair value and whose changes are included inother comprehensive income
Financial assets (equity instruments) measured at fair value and whose changes are included in othercomprehensive income includes other equity instrument investments, etc., are initially measured at fairvalue, and related transaction costs are included in the initial recognition amount.
The financial assets are subsequently measured at fair value, and changes in fair value are included inother comprehensive income. The dividends obtained are included in the current profits and losses.
When the confirmation is terminated, the accumulated gain or loss previously included in othercomprehensive income is transferred from other comprehensive income and included in retained earnings.
（4）Financial assets measured at fair value through profit or loss
Financial assets measured at fair value through profit or loss includs transactional financial assets,derivative financial assets, other non-current financial assets, etc., are initially measured at fair value, andrelated transaction costs are recognised in profit or loss.
The financial assets are subsequently measured at fair value, and changes in fair value are recognisedin profit or loss.
When the derecognition is terminated, the difference between the fair value and the initially recordedamount is recognized as investment income, and the gains and losses from changes in fair value areadjusted.
（5）Financial liabilities measured at fair value through profit or loss
Financial liabilities measured at fair value through profit or loss, include transaction financialliabilities, derivative financial liabilities, etc., are initially measured at fair value, and related transactionexpense is recognised in profit or loss. The financial liabilities are subsequently measured at fair value, andchanges in fair value are recognised in profit or loss.
When the derecognition is terminated, the difference between the fair value and the initially recordedamount is recognized as investment income, and the gains and losses from changes in fair value areadjusted.
（6）Financial liabilities measured at amortized cost
Financial liabilities measured at amortised cost include short-term borrowings, bills payable andaccounts payable, other payables, long-term borrowings, bonds payable, long-term payables, initiallymeasured at fair value, and related transaction costs are included in the initial recognition amount.
Interest calculated by the effective interest method during the period of holding is included in thecurrent profit and loss.
C. Confirmation basis and measurement method of financial asset transfer
When the company transfers a financial asset, if it has transferred almost all the risks and rewards ofownership of the financial asset to the transferee, the financial asset is derecognized; if almost all risks andrewards of ownership of a financial asset are retained, the recognition of the financial asset is notterminated.
When judging whether the transfer of financial assets satisfies the conditions for derecognition of theabove-mentioned financial assets, the principle of substance over form is adopted. The company divides thetransfer of financial assets into the overall transfer and partial transfer of financial assets. If the overalltransfer of financial assets meets the conditions for derecognition, the difference between the following twoamounts is included in the current profit and loss:
（1）The book value of the transferred financial assets;
（2）The sum of consideration received for the transfer and the cumulative change in fair value thatwas originally recognised in the owner's equity (when the transferred financial asset is measured at fairvalue and its changes are included in other comprehensive financial assets (debt instruments) ).
If the partial transfer of financial assets meets the conditions for derecognition, the book value of thetransferred financial assets is apportioned between the derecognised portion and the non-recognised portionaccording to their respective fair values, and the difference between the following two amounts is includedin current profit and loss:
（1）The book value of the derecognition portion;
（2）The sume of the consideration for the termination confirmation section and the amountcorresponding to the termination confirmation part of the cumulative amount of changes in fair value thatwas originally recognised directly in owners' equity(The financial assets involved in the transfer are thefinancial assets measured at fair value and whose changes are included in other comprehensive income(debt instruments)).
If the transfer of financial assets does not meet the conditions for derecognition, the financial assetscontinue to be recognized and the consideration received is recognized as a financial liability.
D. Financial liabilities termination confirmation conditions
If all or part of the current obligations of a financial liability have been discharged, the financialliability or part of it is derecognised; If the company signs an agreement with the creditor to replace theexisting financial liabilities with new financial liabilities, and the contractual terms of the new financialliabilities and the existing financial liabilities are substantially different, the existing financial liabilities arederecognised and the new financial liabilities are recognized.
If substantial changes are made to all or part of the contractual terms of existing financial liabilities,the existing financial liabilities or part of them will be terminated, and the financial liabilities after themodification of the terms will be recognized as a new financial liability.
When the financial liabilities are derecognised in whole or in part, the difference between the carryingamount of the financial liabilities derecognised and the payment consideration (including the transferrednon-cash assets or the new financial liabilities) is recognised in profit or loss.
If the Company repurchases part of the financial liabilities, the book value of the financial liabilities asa whole is allocated on the repurchase date based on the relative fair value of the continuing recognitionportion and the derecognition portion. The difference between the book value assigned to the derecognisedportion and the consideration paid (including the transferred non-cash assets or the new financial liabilitiesassumed) is recognised in profit or loss for the current period.
E. Method for determining the fair value of financial assets and financial liabilities
A financial instrument with an active market that determines its fair value by quoted prices in anactive market. Financial instruments that do not exist in an active market use valuation techniques todetermine their fair value. At the time of valuation, The Company uses valuation techniques that areapplicable in the current circumstances and that are sufficient to support the use of data and otherinformation to select input values that are consistent with the characteristics of assets or liabilitiesconsidered by market participants in transactions in related assets or liabilities, and use relevant observableinput values first. Unobservable inputs are used only if the relevant observable inputs are not available orare not practicable.
F. Test method and accounting treatment method for impairment of financial assets (excludingreceivables)
The Company considers all reasonable and evidence-based information, including forward-lookinginformation, to estimate the expected credit losses of financial assets measured at amortized cost andfinancial assets at fair value through other comprehensive income (debt instruments), either individually orin portfolio. The measurement of expected credit losses depends on whether the credit risks of financialassets have increased significantly since the initial recognition.
If the credit risk of the financial instrument has increased significantly since the initial recognition, theCompany measures its loss preparation according to the amount of expected credit loss corresponding tothe entire duration of the financial instrument; If the credit risk of the financial instrument has not increasedsignificantly since the initial recognition, the Company measures its loss provision based on the amount ofexpected credit loss within 12 months of the financial instrument. The increase or reversal of the lossprovision resulting from this is recognised in profit or loss as an impairment loss or gain.
If the financial instrument's credit risk at the balance sheet date is low, the Company believes that thecredit risk of the financial instrument has not increased significantly since the initial recognition.
(11) Notes Receivable
The method for determining the expected credit loss of the notes receivable and the accountingtreatment method are treated in accordance with the “5, (10) financial instruments 6, financial assets(excluding receivables) impairment test methods and accounting treatment methods”.
(12) Accounts Receivable
Method for determining expected credit loss of accounts receivable and accounting treatment methodA. Accounts ReceivableFor accounts receivable, whether or not it contains significant financing components, the Companyhas always measured its loss provision in accordance with the amount of expected credit losses for theentire duration of the life, and the increase or reversal of the loss provision resulting therefrom is includedin the current profit and loss as an impairment loss or gain.
（1）Receivables with significant single amount and separate provision for bad debts:
Judgment amount standard with significant single amount: the top five balance of accounts receivable.If there is objective evidence that a receivable has been credit-depreciated, the Company makesprovision for bad debts and confirms the expected credit losses for the accounts receivable.
（2）Provision for bad debts receivables based on credit risk characteristics:
The Company combines the accounts receivable according to similar credit risk characteristics (age)and estimates the proportion of the provision for bad debts of the accounts receivable based on allreasonable and evidenced information, including forward-looking information.When a single financial asset cannot obtain information for estimating expected credit losses at areasonable cost, the company divides the receivables into several combinations according to the credit riskcharacteristics, and calculates the expected credit losses on a combined basis. The basis for determining thecombination is as follows:
| Portfolio1 | Receivables guaranteed by financial institutions |
| Portfolio2 | Amount due from government agencies and institutions |
| Portfolio3 | Security deposit |
| Portfolio4 | Employee reserve and employee collection and payment |
| Portfolio5 | Balances of receivables other than accounts receivable subject to provisions for bad debts on an individual basis and other receivables |
B.Other receivables
For the measurement of impairment losses of receivables other than accounts receivable (includingnotes receivable, other receivables, long-term receivables, etc.), it shall be treated in accordance with the “5,
(10) financial instruments, financial assets (excluding receivables) impairment test methods and accountingtreatment methods”.
(13) Receivable Financing
Not applicable.
(14) Other Receivables
The method for determining the expected credit losses of other receivables and the accountingtreatment methods are treated in accordance with “5. (10) Financial instruments 6. Financial assets(excluding receivables) impairment test methods and accounting treatment methods”.
(15) Inventories
1. Classification of inventories
Inventories are classified into Materials in transit, raw materials, revolving materials, stockcommodities, goods in progress, dispatched goods, material procurement, consigned processing materials,labor cost and others.
2. Measurement method of dispatched inventories
Inventories are measured with weighted average method when dispatched. The percentage matchesmethod of the labor cost and labor revenue. One-off amortization method is adopted for low-costconsumables when they are consumed.
3. Recognition basis for net realizable values of inventories of different categories
In normal operation process, for merchandise inventories for direct sale, including finished goods,stock commodities and materials for sale, their net realizable values are determined at the estimated sellingprices minus the estimated selling expenses and relevant taxes and surcharges; in normal operation process,for material inventories that need further processing, their net realizable values are determined at theestimated selling prices of finished goods minus estimated costs to completion, estimated selling expensesand relevant taxes and surcharges; for inventories held to execute sales contract or service contract, theirnet realizable values are calculated on the basis of contract price. If the quantities of inventories specified insales contracts are less than the quantities held by the Company, the net realizable value of the excessportion of inventories shall be based on general selling prices.
At the end of the period, provisions for inventory depreciation reserve are made on an individual basis.For inventories with large quantity and low unit price, the provisions for inventory depreciation reserve aremade on a category basis. For inventories related to the product portfolios manufactured and sold in thesame area, and of which the final usage or purpose is identical or similar thereto, and which is difficult toseparate from other items for measurement purposes, the provisions for inventory depreciation reserve shallbe made on a portfolio basis.
Except that there is clear evidence that the market price is abnormal on the balance sheet date, the netrealizable value of inventory items shall be recognized at the market price on the balance sheet date.
Net realizable value of inventory items at the end of the year is recognized at the market price on thebalance sheet date.
4. Inventory system
Perpetual inventory system is adopted.
(16) Assets held for Sale
Not applicable.
(17) Debt Investment
Not applicable.
(18) Other Debt Investment
Not applicable.
(19) Long-term Receivables
The method for determining the expected credit loss of long-term receivables and the accountingtreatment method are treated in accordance with the “5, (10) financial instruments 6, financial assets(excluding receivables) impairment test methods and accounting treatment methods”.
(20) Long-term Equity Investments
1. Criteria for judgment of common control and significant influence
The term “common control” refers to the sharing of control over an arrangement in accordance withthe relevant agreement, and related activities of the arrangement must be unanimously agreed by the parties
that share the right of control. Where the Company and other investors exert common joint control over theinvestee and have rights over the net assets of the investee, the investee is a joint venture of the Company.Significant influence refers to the power to participate in making decisions on the financial andoperating policies of an enterprise, but not the power to control, or jointly control, the formulation of suchpolicies with other parties. Where the Company is able to exert significant influence over the investee, theinvestee is its associate.
2. Recognition of initial investment costs
（1）Long-term equity investments acquired from business combination
Business combination under common control: if the Company makes payment in cash, transfersnon-cash assets or bears debts and issues equity securities as the consideration for the business combination,the book value of the owner’s equity of the cquire in the consolidated financial statements of the ultimatecontroller is recognized as the initial cost of the long-term equity investment on the combination date. Incase the Company can exercise control over the investee under common control for additional investmentor other reasons, the initial investment cost of long-term equity investments is recognized at the share ofbook value of net asset of the cquire after the combination in the consolidated financial statements of theultimate controller on the combination date. The stock premium should be adjusted at the differencebetween the initial investment cost of long-term equity investments on the combination date and the bookvalue of long-term equity investments before the combination plus the book value of consideration paid foradditional shares; if there is no sufficient stock premium for write-downs, the retained earnings areadjusted.
Business combination not under common control: The Company recognizes the combination costdetermined on the combination date as the initial cost of long-term equity investments. Where theCompany can exercise control over the investee not under common control for additional investments orother reasons, the initial investment cost changed to be accounted for under the cost method should berecognized at the book value of originally held equity investments plus costs of additional investments.
（2）Long-term equity investment acquired by other means
For a long-term equity investment acquired through making payments in cash, its initial cost is theactually paid purchase cost.
For a long-term equity investment acquired from issuance of equity securities, its initial cost is the fairvalue of the issued equity securities.
If the exchange of non-monetary assets has commercial substance and the fair values of assets tradedout and traded in can be measured reliably, the initial cost of long-term equity investment traded in withnon-monetary assets are determined based on the fair values of the assets traded out and the relevant taxesand surcharges payable unless there is any conclusive evidence that the fair values of the assets traded inare more reliable; if the exchange of non-monetary assets does not meet the above criteria, the book valueof the assets traded out and the relevant taxes and surcharges payable are recognized as the initial cost oflong-term equity investment traded in.
For a long-term equity investment acquired from debt restructuring, its initial cost is determined basedon the fair value.
3. Subsequent measurement and recognition of gains and losses
（1）Long-term equity investment accounted for under the cost method
Long-term equity investments in subsidiaries are accounted for under the cost method. Except for theactual price paid for acquisition of investment or the cash dividends or profits contained in theconsideration which have been declared but not yet distributed, the Company recognizes the investmentincome in the current year at the cash dividends or profits declared by the investee.
（2）Long-term equity investments accounted for under the equity method
Long-term equity investments in associates and joint ventures are accounted for under the equitymethod. If the cost of initial investment is in excess of the proportion of the fair value of the net identifiableassets in the investee when the investment is made, the difference will not be adjusted to the initial cost ofthe long-term equity investments; if the cost of initial investment is in short of the proportion of the fairvalue of the net identifiable assets in the investee when the investment is made, the difference will beincluded in the current profit and loss.The Company shall recognize the investment income and other comprehensive income at the shares ofnet profit and loss and other comprehensive income realized by the investee which the Company shallenjoy or bear and adjust the book value of long-term equity investments at the same time; the Companyshall calculate the shares according to profits or cash dividends declared by the investee andcorrespondingly reduce the book value of long-term equity investments; the book value of long-term equityinvestments shall be adjusted according to the investee’s other changes in owner’s equity other than netprofit and loss, other comprehensive income and profit distribution, which should be included in owner’sequity.
The share of the investee’s net profit or loss should be recognized after adjustments are made to netprofit of the investee based on the fair value of identifiable net assets of the investee upon acquisition ofinvestments and according to accounting policies and accounting period of the Company. When holding theinvestment, the investee should prepare the consolidated financial statements, it shall account for theinvestment income based on the net profit, other comprehensive income and the changes in other owner’sequity attributable to the investee.
When the Company recognizes its share of loss incurred to the investee, treatment shall be done infollowing sequence: firstly, the book value of the long-term equity investment shall be reduced. Secondly,where the book value thereof is insufficient to cover the share of losses, investment losses are recognized tothe extent of book value of other long-term equities which form net investment in the investee in substanceand the book value of long term receivables shall be reduced. Finally, after all the above treatments, if theCompany is still responsible for any additional liability in accordance with the provisions stipulated in theinvestment contracts or agreements, provisions are recognized and included into current investment lossaccording to the obligations estimated to undertake.
（3）Disposal of long-term equity investments
For disposal of long-term equity investment, the difference between its book value and the actual priceshall be included in the current profit and loss.
For long-term equity investments accounted for under the equity method, when the Company disposessuch investments, accounting treatment should be made to the part that is originally included in othercomprehensive income according to the corresponding proportion by using the same basis for the investeeto directly dispose the relevant assets or liabilities. Owner’s equity recognized at the changes in theinvestee’s other owner’s equity other than net profit or loss, other comprehensive income and profitdistribution shall be transferred to the current profit and loss according to the proportion, except for othercomprehensive income from changes arising from re-measurement of net liabilities or net assets of definedbenefit plan.
In case the joint control or significant influence over the investee is lost for disposing part of equityinvestments or other reasons, the remaining equity will be changed to be accounted for according to therecognition and measurement principles of financial instruments. The difference between the fair value andthe book value on the date of the loss of joint control or significant influence should be included in thecurrent profit and loss. For other comprehensive income recognized from accounting of the original equity
investments under the equity method, accounting treatment should be made by using the same basis for theinvestee to directly dispose the relevant assets or liabilities when the equity method is no longer adopted.Owner’s equity recognized from the investee’s changes in other owner’s equity other than net profit or loss,other comprehensive income and profit distribution should all transferred to the current profit and losswhen the equity method confirmed is no longer adopted.In case the control over the investee is lost for disposing part of equity investments or other reasons,when the Company prepares the individual financial statements, where the remaining equity after thedisposal can exercise joint control or significant effect on the investee, then such equity will be changed tobe accounted for under the equity method and the remaining equity is deemed to have been adjusted underthe equity method on acquisition; where the remaining equity after the disposal cannot exercise jointcontrol or significant effect on the investee, then accounting treatment shall be changed to be madeaccording to the relevant provisions on the recognition and measurement principles of financial instruments.The difference between the fair value and the book value on the date of the loss of joint control orsignificant influence should be included in the current profit and loss.In case the disposed equity is acquired from additional investments or other reasons, when theCompany prepares the individual financial statements, where the remaining equity after the disposal isaccounted for under the cost method or the equity method, other comprehensive income and other owner’sequity recognized from the accounting of equity investments held before the acquisition date under theequity method shall be transferred according to the proportion; where accounting treatment of theremaining equity after the disposal is changed to be made according to the recognition and measurementprinciples of financial instruments, all of other comprehensive income and other owner’s equity shall betransferred.
(21) Investment Property
If using the cost measurement model:
Investment properties are properties to earn rentals or for capital appreciation or both. Examplesinclude land leased out under operating leases, land held for long-term capital appreciation, buildingsleased out under operating leases, (including buildings that have been constructed or developed for futurelease out under operating leases, and buildings that are being constructed or developed for future lease outunder operating leases).
The Company adopts the cost model to measure all current investment properties. The Companyadopts the same depreciation policy for the investment property measured at cost model – building forrenting as that for the Company’s fixed assets and the same amortization policy of land use right for rentingas that for the Company’s intangible assets.
(22) Fixed Assets
A. Recognition criteria
Fixed assets refer to tangible assets held for the purpose of producing commodities, providing services,renting or business management with useful lives exceeding one accounting year. Fixed assets will only berecognized when all the following criteria are satisfied:
(1) It is probable that the economic benefits relating to the fixed assets will flow into the Company;and
(2) The costs of the fixed asset can be measured reliably.
B. Depreciation method
| Category | Depreciation Method | Depreciation Life (years) | Residual Rate (%) | Annual Depreciation Rate (%) |
| Buildings and constructions | Straight-line method | 5-50 | 0-10 | 2.00-25.00 |
| Machinery equipment | Straight-line method | 3-15 | 0-10 | 6.00-33.33 |
| Transportation equipment | Straight-line method | 3-14 | 0-10 | 6.43-33.33 |
| Electronic equipment | Straight-line method | 3-14 | 0-10 | 6.43-33.33 |
| Renovations of fixed assets | Straight-line method | 5-15 | 0 | 6.67-20.00 |
| Other equipment | Straight-line method | 3-14 | 0-10 | 6.43-33.33 |
C. Identification basis and pricing method of financing lease fixed assetsIf one of the following conditions is stipulated in the terms of the lease agreement signed between theCompany and the lessor, it is recognized as a leased asset under finance:
(1) The ownership of the leased assets after the lease expires belongs to the Company;
(2) The Company has the option to purchase assets. The purchase price is much lower than the fairvalue of the assets when the option is exercised;
(3) The lease period accounts for the majority of the useful life of the leased asset;
(4) The present value of the minimum lease payment on the lease start date is not significantlydifferent from the fair value of the asset.
At the beginning of the lease, the Company uses the lower of the fair value of the leased asset and thepresent value of the minimum lease payments as the entry value of the leased asset, and uses the minimumlease payment as the entry value of long-term payables. The difference is as unrecognized financing fee.
(23) Construction in Progress
The book values of the construction in progress are stated at total expenditures incurred beforereaching working condition for their intended use. For construction in progress that has reached workingcondition for intended use but relevant budgets for the completion of projects have not been completed, theestimated values of project budgets, prices, or actual costs should be included in the costs of relevant fixedassets, and depreciation should be provided according to relevant policies of the Company when workingcondition is reached. After the completion of budgets needed for the completion of projects, the estimatedvalues should be substituted by actual costs, but depreciation already provided is not adjusted.
(24) Borrowing Costs
A. Recognition criteria for capitalization of borrowing costs
Borrowing costs include the interest on borrowings, the amortization of discount or premium,auxiliary expenses, exchange differences incurred by foreign currency borrowings, etc.
The borrowing costs incurred to the Company and directly attributable to the acquisition andconstruction or production of assets eligible for capitalization should be capitalized and recorded into assetcosts; other borrowing costs should be recognized as costs according to the amount incurred and beincluded into current profit and loss.
Assets eligible for capitalization refer to fixed assets, investment property, inventories and other assetswhich may reach their intended use or sale status only after long-time acquisition and construction orproduction activities.
Borrowing costs may be capitalized only when all the following conditions are met at the same time:
(1) The asset disbursements have already incurred, which shall include the cash paid, non-cash assetstransferred or interest bearing debts undertaken for the acquisition and construction or production activitiesfor preparing assets eligible for capitalization;
(2) The borrowing costs has already incurred; and
(3) Purchase, construction or manufacturing activities that are necessary to prepare the asset for itsintended use or sale have already started.
B. Capitalization period of borrowing costs
Capitalization period refers to the period from commencement of capitalization of borrowing costs toits cessation; period of suspension for capitalization is excluded.
When the qualified asset under acquisition and construction or production is ready for the intended useor sale, the capitalization of the borrowing costs shall be ceased.
When some projects among the acquired and constructed or produced assets eligible for capitalizationare completed and can be used separately, the capitalization of borrowing costs of such projects should beceased.
Where construction for each part of assets purchased, constructed or manufactured has beencompleted separately but can be used or sold only after the entire assets have been completed, capitalizationof attributable borrowing costs should cease at the completion of the entire assets.
C. Period of capitalization suspension
If the acquisition and construction or production activities of assets eligible for capitalization areinterrupted abnormally and this condition lasts for more than three months, the capitalization of borrowingcosts should be suspended; if the interruption is necessary for the acquisition and construction orproduction to prepare the assets for their intended use or sale, the capitalization of borrowing costs shouldcontinue. The borrowing costs incurred during interruption are recognized in the current profit and loss, andthe capitalization of borrowing costs continues after the restart of the acquisition and construction orproduction activities of the assets.
D. Capitalization rate and measurement of capitalized amounts of borrowing costs
As for special borrowings borrowed for acquiring and constructing or producing assets eligible forcapitalization, the to-be-capitalized amount shall be determined at interest expense of special borrowingactually incurred in the current period less the interest income of the borrowings unused and deposited inbank or return on temporary investment.
As for general borrowings used for acquiring and constructing or producing assets eligible forcapitalization, the to-be-capitalized amount should be calculated by multiplying the weighted average ofasset disbursements of the part of accumulated asset disbursements exceeding special borrowings by thecapitalization rate of used general borrowings. The capitalization rate is calculated by using the weightedaverage interest rate of general borrowings.
(25) Biological Assets
Not applicable.
(26) Oil and Gas Assets
Not applicable.
(27) Use-of-right Assets
Not applicable.
(28) Intangible Assets
A. Valuation method, service life, impairment test
(1) Measurement of intangible assets
① The Company initially measures intangible assets at cost on acquisition
The costs of external purchase of intangible assets comprise their purchase prices, related taxes andsurcharges and any other directly attributable expenditure incurred to prepare the asset for its intended use.If payments for the purchase of intangible assets are extended beyond the normal credit terms withfinancing nature, the costs of intangible assets are determined on the basis of present values of the purchaseprices.For intangible assets obtained from debtors in settlement of his liabilities in case of debt restructuring,they should be initially stated at their fair values. Differences between the book values and the fair valuesof the intangible assets are charged to profit or loss for the current period.If the exchange of non-monetary assets has commercial substance, and the fair values of these assetscan be measured reliably, the book-entry values of intangible assets traded in are based on the fair values ofthe intangible assets traded out unless there is any conclusive evidence that the fair values of the assetstraded in are more reliable. If the exchange of non-monetary assets does not meet the above criteria, thecosts of the intangible assets traded in should be the book values of the assets traded out and relevant taxesand surcharges paid, and no profit or loss shall be recognized.
② Subsequent measurement
The useful lives of the intangible assets are analyzed and determined on their acquisition.
As for intangible assets with limited useful life, straight-line amortization method is adopted in theperiod when the intangible assets generate economic benefit for enterprise; if the period when theintangible assets generate economic benefit for enterprise cannot be forecasted, the intangible assets shallbe deemed as those with indefinite useful life and shall not be amortized.
(2) Estimate of the useful life of the intangible assets with finite useful lives :
| Item | Estimated Useful Lives |
| Land use right | 50 years |
| Right to use trade mark | 10 years |
| Patent and non-patent technology | 4-8 years |
| Computer software | 3-10 years |
The useful lives and amortization methods of intangible assets with limited useful lives are reviewedat each year end.
Upon review, the useful lives and amortization method of the intangible assets as at the end of the yearare not different from those estimated before.
(3) Specific criteria divided the research stage and development stage
Expenditure internal research and development project is divided into research expenditures anddevelopment expenditures.
Research stage: the planned investigation and research activities to acquire and understand newscientific or technological knowledge.
Development stage: before commercial production and use, the research findings or other knowledgeare applied in some plan or design to produce new or substantially improved materials, devices, products,etc.
B. Internal research and development expenditure accounting policy
Specific criteria divided the research stage and development stage:
If it can be reliably estimated that future economic benefits will flow to the entity, and that thepurchase and production costs can be reliably measured, the development cost should be capitalized. Themeasurement of production cost of internally generated intangible assets is based on direct cost, indirectcost and amortization.If it can be clearly defined that newly developed products or methods are technically feasible, and thatthey are intended for private use or sale, the development cost should be capitalized. The capitalizeddevelopment cost should be amortized within a product’s expected 5 to 8 years’ life cycle, using astraight-line method. If the value in use cannot be recognized, impairment and amortization should becarried out. Research cost and the development cost which cannot be capitalized should be expense when itoccurs.
(29) Impairment of Long-term Assets
The Company will conduct the impairment test if any evidence suggests that the long-term assets,such as the long-term equity investment and the investment property, fixed assets, construction in progressand intangible assets, are impaired on the balance sheet date. If impairment test results indicate that therecoverable amounts of the assets are lower than their carrying amounts, the provision for impairment ismade based on the differences which are recognized as impairment losses. The recoverable amount is thehigher of the fair value of the asset minus the disposal expenses and the present value of the estimatedfuture cash flow of the asset. The provision for assets impairment is calculated and recognized by theindividual asset. If it is difficult to estimate the recoverable amount of an individual asset, the Companyshall estimate the recoverable amount of the asset portfolio that the individual asset belongs to. The assetportfolio is the minimum asset group that can independently generate the cash inflow.
Goodwill is tested for impairment at least at the end of each year.
The Company conducts an impairment test for the goodwill. The book value of goodwill arising frombusiness combinations is amortized to relevant asset groups with a reasonable method since the date ofacquisition; or amortized to relevant combination of asset groups if it is difficult to be amortized to relevantasset groups. The book value of goodwill is amortized to relevant asset groups or combinations of assetgroups according to the proportion of the fair value of such asset groups or combinations of asset groups inthe total fair value of relevant asset groups or combinations of asset groups. Where the fair value cannot bereliably measured, it should be amortized according to proportion of the book value of each asset group orcombination of asset group in the total book value of relevant asset groups or combinations of asset groups.
When making an impairment test on the relevant asset groups or combination of asset groupscontaining goodwill, if any indication shows that the asset groups or combinations of asset groups related tothe goodwill may be impaired, the Company shall first conduct an impairment test on the asset groups orcombinations of asset groups not containing goodwill, calculate the recoverable amount and compare itwith the relevant book value to recognize the corresponding impairment loss. Then the Company shallconduct an impairment test on the asset groups or combinations of asset groups containing goodwill, andcompare the book value of these asset groups or combinations of asset groups (including the book value ofthe goodwill apportioned thereto) with the recoverable amount. Where the recoverable amount of therelevant asset groups or combinations of asset groups is lower than the book value thereof, the Companyshall recognize the impairment loss of the goodwill. The above impairment loss is not reversed in the futureaccounting period once recognized.
(30) Long-term Deferred Expenses
Not applicable.
(31) Employee compensation
1. Accounting treatment of short-term remuneration
During the accounting period in which employees provide service to the Company, the short-termremuneration actually incurred is recognized as liabilities and charged to the current profit or loss or therelevant assets cost.The medical insurance premium, work-related injury insurance premium and the housing providentfund paid by the Company for its employees, together with the labor union expenditures and employeeeducation are used to calculate and determine the relevant employee compensation amount based on theprescribed accrual basis and accrual proportion.
The non-monetary benefits for employees that can be measured reliably are measured at fair value.
2. Accounting treatment of benefits paid after departure
(1) Defined withdrawal plan
The basic endowment insurance premium and unemployment insurance premium paid by theCompany for its employees in accordance with relevant provisions of the local government are recognizedas liabilities and charged to the current profit or loss or the relevant assets cost, with the payable amountcalculated based on the local prescribed payment base and percentage, during the accounting period inwhich the employees provide services to the Company.
In addition to the basic endowment insurance, the Company also builds the enterprise annuity paymentsystem (supplementary pension insurance) in accordance with relevant national policies for enterpriseannuity system. The Company pays a certain percentage of the total employee compensation to the localsocial institution, and record the relevant expenditures into the current profit or loss or the relevant assetscost.
(2) Defined benefit plan
The Company attributes the welfare obligation arising from the defined benefit plan to the periodduring which the employees provide services, in accordance with the formula determined under theestimated accumulated welfare unit method, and records the same into the current profit or loss or therelevant asset cost.
A net liability or net asset in relation to the defined benefit plan is recognized at the present value ofthe obligation under the defined benefit plan less the deficit or surplus arising out of the fair value of theassets in relation to the defined benefit plan. Where the defined benefit plan has any surplus, the Companywill determine the net assets in relation to the defined benefit plan at the lower of the surplus of the definedbenefit plan or the asset cap.
The obligations under the defined benefit plan, including the estimated payment obligation within 12months following the annual report period during which the employees provide service, are discounted tothe present value at the market return of the national debt of which the term and currency match those ofthe obligation under the defined benefit plan on the balance sheet date, or of the high-quality corporate debtin an active market.
The service cost incurred by the defined benefit plan, together with the net interest on the net liabilityor net asset in relation to the defined benefit plan, are charged to the current profit or loss or the relevantasset cost; the change arising from the re-measurement of the net liability or net asset in relation to thedefined benefit plan are recorded into other comprehensive income and are not reversed to the profit or lossin the subsequent accounting period.
The gains or losses on the settlement in respect of the defined benefit plan are recognized at thedifference between the present value and the settlement price of the obligation under the defined benefitplan on the settlement date.
3. Accounting treatment of dismissal welfare
Where the Company cannot unilaterally withdraw the dismissal welfare offered in view of thecancellation of the labor relation plan or the layoff proposal, or recognizes the cost or expenses as to therestructuring involving the payment of dismissal welfare (whichever is earlier), the employee compensationarising from the dismissal welfare should be recognized as the liabilities and charged to the current profit orloss.
(32) Estimated Liabilities
1. Recognition criteria for estimated liabilities
The Company should recognize an obligation in relation to contingencies as an estimated liability,such as the litigation, debt guarantee, loss-making contract or restructuring, when all the followingconditions are satisfied:
(1) The obligation is a present obligation of the Company;
(2) The performance of such obligation is likely to result in outflow of economic benefits from theCompany;
(3) The amount of the obligation can be measured reliably.
2. Measurement of estimated liabilities
The estimated liabilities of the Company are initially measured as the best estimate of expensesrequired for the performance of relevant present obligations.
The risks, uncertainties, time value of money, and other factors relating to the contingencies. If thetime value of money is significant, the best estimates shall be determined after discount of relevant futurecash outflows.
The best estimates shall be treated as follows in different circumstances:
If there is continuous range (or interval) for the necessary expenses, and probabilities of occurrence ofall the outcomes within this range are equal, the best estimate shall be determined at the average amount ofupper and lower limits within the range.
Given the fact that there is no continuous range (or interval) for the necessary expenses, orprobabilities of occurrence of all the outcomes within this range are unequal despite such a range exists, incase that the contingency involves a single item, the best estimate shall be determined at the most likelyoutcome; if the contingency involves two or more items, the best estimate should be determined accordingto all the possible outcomes with their relevant probabilities.
When all or part of the expenses necessary for the settlement of an estimated liabilities are expected tobe compensated by a third party or other parties, the compensation shall be separately recognized as anasset only when it is virtually certain that the compensation will be received. The amount recognized forthe compensation shall not exceed the book value of the estimated liabilities.
(33) Lease Liabilities
Not applicable.
(34) Share Payment
Not applicable.
(35) Other Financial Instruments such as Preferred Shares and Perpetual BondsNot applicable.
(36) Incomes
1. Specific criteria for determining the timing of income recognition for sales of goods
The Company will confirm that the sales income of the goods is realized when the Company hastransferred the major risks and rewards of ownership of the goods to the purchaser; the Company does notretain the right to continue management linked to ownership, nor does it have effective control over theproducts sold; the amount of income can be measured reliably; the related costs incurred or to be incurredcan be reliably measured.
The specific judgment criteria are as follows:
(1) Domestic sales: After the delivery of the goods, the Company confirms the sales income.According to the delivery method agreed in the sales order, the detailed standards for income recognitionare:
When the customer goes directly to the warehouse of the Company to pick up goods, based on theoutbound documents confirmed by the parties in various ways, the income is confirmed when the goodsleave the warehouse.
When the customer appoints a carrier, based on the logistics document issued by the carrier, income isrecognized when the goods are delivered to the carrier.
When the Company appoints a carrier, based on the logistics receipts signed and confirmed by thecustomer, income is recognized when the customer actually signs the receipt.
When the Company sells through the e-commerce platform, income is recognized when the electronicorder received by the customer to confirm the receipt or the e-commerce receipt period expires.
If an unconditional return period or acceptance period has been agreed upon, the income recognitionwill be delayed to the expiry of unconditional return periodor acceptance period.
For sales on behalf of distributors, the income is recognized when the dealership list with the finalcustomer confirmation is received.
(2) International sales: If choose to apply international trade terms, sale income is recognizedaccording to the time point of risk transfer agreed in the specific applicable international trade terms. If anunconditional return period or acceptance period is agreed upon, the income recognition will be extended tothe unconditional return period or the acceptance period after meeting the applicable trade term risk transferpoint. If no international trade terms have been selected, the Company will recognize income afterobtaining various types of risk transfer documents according to the agreed delivery method and the time ofrisk transfer.
(3) Sales of specialized sewing machine: As the customer has deeply customized the machine,according to the relevant agreement in the contract signed by both parties, the specific delivery obligationsunder each technical clause are distinguished, and the corresponding income is confirmed according to thecompletion of the customer demand and the relevant confirmation documents.
2. Recognition of income from transfer of assets use right
When the economic benefit related to the transaction is probably to flow into the Company and therelevant income can be reliably measured, the income from transfer of the assets use right is determined asfollows:
(1) Interest income is measured based on the length of time for which the Company’s monetary fundsis used by others and the applicable interest rate;
(2) Royalty income is measured according to the period and method of charging as stipulated in therelevant agreements or contracts.
3. Measurement principles and methods of completion stage where revenues from rendering oflabor are recognized under percentage-of-completion method
The Company confirmed the income from the labor service when obtain the written settlementconfirmation from the customer and issue the settlement certificate.
If the outcome of transactions can be estimated reliably at the balance sheet date, income fromrendering of labor service is recognized under the percentage-of-completion method. The percentage ofcompletion is determined by measurement of completed work as a percentage of total estimated costs.Income from rendering of labor service is determined by prices stated in the contracts or agreements,whether already received or to be received, unless such relevant prices are unfair. The current income fromthe rendering of labor service is recognized at the amount of multiplying the total income from therendering of labor service by completion progress and deducting the accumulated income from therendering of labor service recognized in previous accounting periods on the balance sheet date; meanwhile,the current cost of labor service is carried forward by the amount of multiplying the total costs of therendering of labor service by completion progress and deducting the accumulated cost from the renderingof labor services recognized in previous accounting periods.When the outcome of transactions involving the rendering of services cannot be estimated reliably,income is recognized and measured at the balance sheet date as follows:
(1) If the service costs incurred are expected to be fully recoverable, the amounts equal to the laborcosts incurred shall be recognized as incomes and the equivalent amounts of labor costs shall be carriedforward;
(2) If the service costs incurred are not expected to be fully recoverable, the labor costs incurred shallbe included in the current profit and loss, with no income from the rending of labor services not recognized.
The Company’s income from logistics service and sewing equipment maintenance services isrecognized when related services have been provided, service costs have actually occurred, and servicesettlement documents confirmed by the service recipient have been obtained.
(37) Government Grants
A. Types
Government grants refer to the monetary or non-monetary assets obtained by the Company from thegovernment for free. Government grants are classified into government grants related to assets andgovernment grants related to income.
Government grants related to assets refer to government grants obtained by the Company that are usedto purchase, construct or form long-term assets, including financial allocations for purchases of fixed assetsor intangible assets, and financial discounts for special loans for fixed assets. Government grants related toincome refer to government grants other than those related to assets.
The Company’s specific criteria for classifying government grants as related to assets are: governmentgrants obtained by the Company that are used to purchase, construct or form long-term assets.
The Company’s specific criteria for classifying government grants as related to income are:
government grants other than those related to assets.
If the government documents do not clearly specify the target of the grant, the judgment basis ofclassifying the government grant as related to the assets or related to the income is whether it is used topurchase or construct or form long-term assets.
B. Accounting treatment
Government grants related to assets: write down the carrying amount of the related assets or recognizethem as deferred income. If it is recognized as deferred income, it shall be recorded into current profits andlosses in a reasonable and systematic way within the useful life of the relevant assets (related to theCompany’s daily activities, included in other income; unrelated to the Company’s daily activities, includedin non-operating income).
Government grants related to income: grants used to compensate for the related costs or losses of theCompany in the future period, shall be recognized as deferred income, and shall be recorded in the currentprofits and losses (related to the Company’s daily activities, included in other income; unrelated to theCompany’s daily activities, included in non-operating income), or be used to reduce the related costs,expenses or losses during the period for confirming the relevant costs, expenses or losses.
(38) Deferred Income Tax Assets and Deferred Income Tax Liabilities
Deferred income tax assets shall be recognized for deductible temporary differences to the extent thatit is probable that taxable profit will be available against which the deductible temporary differences can beutilized. Deferred income tax assets should be recognized for deductible temporary differences to the extentthat it is probable that taxable profit will be available against which the deductible temporary differencescan be utilized.
Taxable temporary differences are recognized as deferred income tax liabilities except in specialcircumstances.
Special circumstances in which deferred income tax assets or deferred income tax liabilities shall notbe recognized include: the initial recognition of goodwill; other transactions or events excluding businesscombinations, which affect neither accounting profits nor the taxable income (or deductible losses) whenoccurred.
If the Company has the legal right of netting and intends to settle in net amount or to obtain assets anddischarge liabilities simultaneously, the income tax assets and income tax liabilities of the Company for thecurrent period shall be presented based on the net amount after offset.
When the Company has the legal rights to balance income tax assets and income tax liabilities for thecurrent period with net settlement, and deferred income tax assets and deferred income tax liabilities arerelated to the income tax which are imposed on the same taxpaying subject by the same tax collectionauthority or on different tax paying subjects, but, in each important future period in connection with thereverse of deferred income tax assets and liabilities, the involved tax paying subject intends to balanceincome tax assets and liabilities for the current period with net settlement at the time of obtaining assets anddischarging liabilities, deferred income tax assets and deferred income tax liabilities shall be presentedbased on the net amount after offset.
(39) Lease
A. Accounting treatment of operating lease
(1) Lease fees paid by the Company for leased asset shall be amortized at straight-line method over thewhole lease period (including rent-free period) and shall be included in the current expenses. Initial directcosts relating to lease transactions incurred by the Company shall be recognized as the current expenses.
If the expense related to the lease which shall be paid by the Company is assumed by the lessor of theasset, then such expenses shall be deducted from total lease fees, and the balances shall be amortized overthe lease term s and charged to the current expenses.
(2) The lease fees received for the assets acquired under lease shall be recognized as current expensesover the lease terms (including rent-free periods) on a straight-line basis. The initial direct costs related tolease transactions paid by the Company, included in the current expenses; if a larger amount is to becapitalized, according to confirm the same basis throughout the period of the lease installments related tothe lease income is recognized in profit gains.B. Accounting treatment of financial lease
(1) Assets rented in by financial lease: At the beginning of the lease, the Company uses the lower ofthe fair value of the leased assets and the present value of the minimum lease payments as the entry valueof the leased assets, and uses the minimum lease payment as the entry value of the long-term payables. The
difference is used as unrecognized financing expenses. The Company adopts the actual interest rate methodto amortize the unrecognized financing expenses during the asset lease period and count it into financialexpenses. The initial direct costs incurred by the company are included in the value of the leased assets.
(2) Assets rented out by financial lease: At the lease beginning date, the Company recognizes thefinancial lease receivables, difference between the sum of unguaranteed residual value and its current valueas unrealized financing income. It is recognized as lease income in each period during which rent isreceived in the future. The initial direct costs incurred by the Company in relation to the lease transactionare included in the initial measurement of the financial lease receivable, and the amount of incomerecognized in the lease period is reduced.
(40) Termination of Business
Termination of business is a component that has been disposed of by the Company or classified asheld for sale by the Company, which is one of the following conditions, and can be separately distinguishedwhen operating and preparing financial statements:
(1) This component represents an independent principal business or a major business area;
(2) This component is part of a plan to dispose of an independent primary business or a majoroperating area;
(3) This component is a subsidiary obtained only for resale.
(41) Changes in Important Accounting Policies and Accounting Estimates
A. Changes in important accounting policies
On April 30, 2019, the Ministry of Finance issued the Notice on Amending the 2019 Annual FinancialStatements of General Enterprises (Accounting (2019) No. 6), and revised the financial statement format ofgeneral enterprises. In 2017, the Ministry of Finance revised and promulgated four accounting standardsrelated to financial instruments, the "Accounting Standards for Business Enterprises No. 22 - Recognitionand Measurement of Financial Instruments" (Accounting [2017] No. 7), "Accounting Standards forBusiness Enterprises No. 23 - Transfer of Financial Assets" (Accounting [2017] No. 8), "AccountingStandards for Business Enterprises No. 24 - Hedging" (Accounting [2017] No. 9), "Accounting Standardsfor Business Enterprises No. 37 - Financial Instruments Presentation" (Finance [2017] No. 14) (hereinafterreferred to as the “New Financial Instruments Guidelines”). Enterprises listed both in China and overseasshall implement the above guidelines from January 1, 2018. Other domestic listed companies shallimplement the above guidelines from January 1, 2019. The Company is a domestic listed company, and theNew Financial Instrument Guidelines shall be implemented from January 1, 2019. The main impacts of theCompany's implementation of the above provisions are as follows:
| Content and reasons for changes in accounting policies | Approval procedure | Remarks (name and amount of report items affected by importance) |
| (1) The “notes receivable and accounts receivable” in the balance sheet are divided into “notes receivable” and “accounts receivable”; “notes payable and accounts payable” are divided into “notes payable” and “accounts payables”. The comparison data is adjusted accordingly. | “Notes receivable and accounts receivable” in the balance sheet are divided into “notes receivable” and “accounts receivable”. The amount of “notes receivable” was RMB 60,046,109.79 yuan from January 1, 2019 to June 30, 2019, and the amount from January 1, 2018 to June 30, 2018 was RMB 81,482,151.15 yuan. the amount of “accounts receivable” was RMB 602,322,319.41 yuan from January 1, 2019 to June 30, 2019, and the amount from January 1, 2018 to June 30, 2018 was RMB 536,278,543.75; “Notes payable and accounts payable” are divided into “notes payable” and “accounts |
| payables”. The amount of “notes payable” was RMB 66,510,597.85 yuan from January 1, 2019 to June 30, 2019, and the amount i from January 1, 2018 to June 30, 2018 was RMB 71,109,160.21 yuan. The amount of “accounts payable” was RMB 214,381,121.77 yuan from January 1, 2019 to June 30, 2019, and the amount i from January 1, 2018 to June 30, 2018 was RMB 247,693,879.70 yuan. | ||
| (2) Notes Receivable and accounts receivable measured at fair value through other comprehensive income are reclassified from “other current assets” to “receivables financing”; the comparative data is adjusted accordingly. | N/A | |
| (3) Under the investment income in the income statement, the item “where: the financial assets are recognized and recognized as amortized cost” is added, and the comparative data is not adjusted. | N/A | |
| (4) The financial assets are classified as “financial assets measured at amortized cost” and “fairly The financial assets whose value is measured and whose changes are included in other comprehensive income, and the financial assets measured at fair value through profit or loss. (5) Adjusted the accounting treatment of non-trading equity instrument investment. Allowing an enterprise to designate a non-trading equity instrument investment to be measured at fair value and its changes are included in other comprehensive income, but the designation is irrevocable and should be included in the cumulative gain or loss previously recognised in other comprehensive income. Transfers to retained earnings shall not be carried forward to the current profits and losses. (6) The impairment of financial assets was changed from “the loss occurred method” to “expected loss method”, and the scope of the provision was expanded to make provision for impairment of financial assets more timely and full, revealing and preventing financial asset credit risk (7) The judgment principle of financial assets transfer and its accounting treatment are further clarified. (8) The hedge accounting standard expands the scope of eligible hedged items and hedging instruments, replaces quantitative requirements with qualitative hedge effectiveness test requirements, and introduces a “rebalancing” mechanism for hedging relationships. (9) The relevant disclosure requirements for financial instruments are adjusted accordingly. | The twelfth meeting of the eighth board of directors | Retrospective adjustment of consolidated statement data at the beginning of the year: 1. Increase trading financial assets: 86,406,778.33 yuan; 2. Reduce accounts receivable: 563,078.70 yuan; 3. Reduce other receivables: 91,853.79 yuan; 4. Reduce available-for-sale financial assets: 117,733,027.78 yuan; 5. Adjust other comprehensive income: 46,940,385.41 yuan; 6. Adjust undistributed profit: 11,741,623.31 yuan. |
B. Adjustment for changes in principal accounting estimatesNot applicable.
C. First implementation of the new financial instruments guidelines, new income standards, newlease standards, adjustments to the first implementation of the financial statements related projectsat the beginning of the year
Consolidated Statement of Financial Position
| Item | December 31, 2018 | January 1, 2019 | Adjustment |
| Current assets: | |||
| Cash and cash equivalents | 595,034,146.11 | 595,034,146.11 | |
| Deposit reservation for balance | |||
| Lending funds | |||
| Transactional financial assets | 86,406,778.33 | 86,406,778.33 | |
| Financial assets at fair value whose fluctuation is attributed to profit or loss |
| Item | December 31, 2018 | January 1, 2019 | Adjustment |
| for current period | |||
| Derivative financial assets | |||
| Notes receivable | 81,482,151.15 | 81,482,151.15 | |
| Accounts receivable | 536,278,543.75 | 535,715,465.05 | -563,078.70 |
| Receivable financing | |||
| Prepayment | 39,695,762.85 | 39,695,762.85 | |
| Premiums receivable | |||
| Reinsurance accounts receivable | |||
| Provision of cession receivable | |||
| Other receivables | 120,422,496.29 | 120,330,642.50 | -91,853.79 |
| Including: Interest receivable | |||
| Dividends receivable | 27,041,989.94 | 27,041,989.94 | |
| Redemptory monetary capital for sale | |||
| Inventories | 896,977,884.83 | 896,977,884.83 | |
| Assets held for sale | |||
| Non-current assets maturing within one year | |||
| Other current assets | 249,326,335.31 | 249,326,335.31 | |
| Total current assets | 2,519,217,320.29 | 2,604,969,166.13 | 85,751,845.84 |
| Non-current assets: | |||
| Loans and payments on behalf | |||
| Debt investment | |||
| Available-for-sale financial assets | 117,733,027.78 | -117,733,027.78 | |
| Other debt investment | |||
| Held-to-maturity investments | |||
| Long-term receivables | 31,427,418.92 | 31,427,418.92 | |
| Long-term equity investments | 248,368,207.89 | 248,368,207.89 | |
| Other equity investment | 90,663,190.66 | 90,663,190.66 | |
| Other non-current financial assets | |||
| Investment properties | 145,386,135.12 | 145,386,135.12 | |
| Fixed assets | 473,157,221.59 | 473,157,221.59 | |
| Construction in progress | 119,166,627.75 | 119,166,627.75 | |
| Productive biological assets | |||
| Oil and gas assets | |||
| Right-of-use assets | |||
| Intangible assets | 270,072,349.34 | 270,072,349.34 | |
| Development expenditures | 6,798,312.48 | 6,798,312.48 | |
| Goodwill | 140,074,270.28 | 140,074,270.28 | |
| Long-term deferred expenses | 3,875,409.77 | 3,875,409.77 | |
| Deferred income tax assets | 68,850,860.84 | 68,850,860.84 | |
| Other non-current assets | |||
| Total non-current assets | 1,624,909,841.76 | 1,597,840,004.64 | -27,069,837.12 |
| Total assets | 4,144,127,162.05 | 4,202,809,170.77 | 58,682,008.72 |
| Current liabilities: | |||
| Short-term loans | 206,614,015.12 | 206,614,015.12 | |
| Borrowings from central bank | |||
| Borrowings from banks and other financial institutions | |||
| Transactional financial liabilities | |||
| Financial liabilities at fair value whose fluctuation is attributed to profit or loss for current period | |||
| Derivative financial liabilities | |||
| Notes payable | 71,109,160.21 | 71,109,160.21 | |
| Accounts payable | 247,693,879.70 | 247,693,879.70 | |
| Receipt in advance | 75,412,987.77 | 75,412,987.77 | |
| Financial assets sold for repurchase | |||
| Deposits from customers and interbank | |||
| Acting trading securities | |||
| Acting underwriting securities | |||
| Employee benefits payable | 101,169,469.49 | 101,169,469.49 | |
| Taxes and surcharges payable | 21,208,862.17 | 21,208,862.17 | |
| Item | December 31, 2018 | January 1, 2019 | Adjustment |
| Other payables | 254,827,223.50 | 254,827,223.50 | |
| Including: Interest payable | 805,898.77 | 805,898.77 | |
| Dividends payable | 1,032,818.86 | 1,032,818.86 | |
| Handling charges and commissions payable | |||
| Reinsurance accounts payable | |||
| Liabilities held for sale | |||
| Non-current liabilities maturing within one year | 4,173,297.07 | 4,173,297.07 | |
| Other current liabilities | 47,083.80 | 47,083.80 | |
| Total current liabilities | 982,255,978.83 | 982,255,978.83 | |
| Non-current liabilities: | |||
| Provision for insurance contracts | |||
| Long-term loans | 340,477,650.27 | 340,477,650.27 | |
| Bonds payable | |||
| Including: preference shares | |||
| Perpetual bond | |||
| Lease liability | |||
| Long-term payables | 3,403,296.49 | 3,403,296.49 | |
| Long-term employee benefits payable | 234,036,612.41 | 234,036,612.41 | |
| Estimated liabilities | 672,720.00 | 672,720.00 | |
| Deferred income | |||
| Deferred income tax liabilities | 70,805,236.44 | 70,805,236.44 | |
| Other non-current liabilities | 520,000.00 | 520,000.00 | |
| Total non-current liabilities | 649,915,515.61 | 649,915,515.61 | |
| Total liabilities | 1,632,171,494.44 | 1,632,171,494.44 | |
| Owners' equity | |||
| Share capital | 548,589,600.00 | 548,589,600.00 | |
| Other equity instruments | |||
| Including: preference shares | |||
| Perpetual bond | |||
| Capital reserves | 916,215,448.24 | 916,215,448.24 | |
| Less: treasury stock | |||
| Other comprehensive income | -75,701,094.41 | -28,760,709.00 | 46,940,385.41 |
| Special reserves | |||
| Surplus reserves | 4,546,242.52 | 4,546,242.52 | |
| General risk reserves | |||
| Undistributed profits | 819,208,053.71 | 830,949,677.02 | 11,741,623.31 |
| Total owners' equity attributable to the parent company | 2,212,858,250.06 | 2,271,540,258.78 | 58,682,008.72 |
| Minority interest | 299,097,417.55 | 299,097,417.55 | |
| Total owners' equity | 2,511,955,667.61 | 2,570,637,676.33 | 58,682,008.72 |
| Liabilities and owners' equity | 4,144,127,162.05 | 4,202,809,170.77 | 58,682,008.72 |
Notes of adjustment: not applicable.
Statement of Financial Position
| Item | December 31, 2018 | January 1, 2019 | Adjustment |
| Current assets: | |||
| Cash and cash equivalents | 125,257,400.64 | 125,257,400.64 | |
| Transactional financial assets | 86,406,778.33 | 86,406,778.33 | |
| Financial assets at fair value whose fluctuation is attributed to profit or loss for current period | |||
| Derivative financial assets | |||
| Notes receivable | 8,713,253.21 | 8,713,253.21 | |
| Accounts receivable | 40,853,861.26 | 40,853,861.26 | |
| Receivable financing | |||
| Prepayment | 1,013,250.66 | 1,013,250.66 | |
| Other receivables | 154,756,949.21 | 154,754,021.93 | -2,927.28 |
| Including: Interest receivable | |||
| Item | December 31, 2018 | January 1, 2019 | Adjustment |
| Dividends receivable | 1,050,356.92 | 1,050,356.92 | |
| Inventories | 116,010,332.72 | 116,010,332.72 | |
| Assets held for sale | |||
| Non-current assets maturing within one year | |||
| Other current assets | 182,331,726.62 | 182,331,726.62 | |
| Total current assets | 628,936,774.32 | 715,340,625.37 | 86,403,851.05 |
| Non-current assets: | |||
| Debt investment | |||
| Available-for-sale financial assets | 117,733,027.78 | -117,733,027.78 | |
| Other debt investment | |||
| Held-to-maturity investments | |||
| Long-term receivables | 132,003,607.99 | 132,003,607.99 | |
| Long-term equity investments | 795,948,021.03 | 795,948,021.03 | |
| Other equity investment | 90,663,190.66 | 90,663,190.66 | |
| Other non-current financial assets | |||
| Investment properties | 82,357,348.39 | 82,357,348.39 | |
| Fixed assets | 5,108,388.24 | 5,108,388.24 | |
| Construction in progress | 2,804,766.05 | 2,804,766.05 | |
| Productive biological assets | |||
| Oil and gas assets | |||
| Right-of-use assets | |||
| Intangible assets | 10,991,616.43 | 10,991,616.43 | |
| Development expenditures | |||
| Goodwill | |||
| Long-term deferred expenses | 1,600,982.68 | 1,600,982.68 | |
| Deferred income tax assets | 940,809.20 | 940,809.20 | |
| Other non-current assets | |||
| Total non-current assets | 1,149,488,567.79 | 1,122,418,730.67 | -27,069,837.12 |
| Total assets | 1,778,425,342.11 | 1,837,759,356.04 | 59,334,013.93 |
| Current liabilities: | |||
| Short-term loans | 9,348,148.62 | 9,348,148.62 | |
| Transactional financial liabilities | |||
| Financial liabilities at fair value whose fluctuation is attributed to profit or loss for current period | |||
| Derivative financial liabilities | |||
| Notes payable | |||
| Accounts payable | 95,996,884.11 | 95,996,884.11 | |
| Receipt in advance | 19,890,459.82 | 19,890,459.82 | |
| Employee benefits payable | 9,208,635.04 | 9,208,635.04 | |
| Taxes and surcharges payable | 4,352,572.60 | 4,352,572.60 | |
| Other payables | 174,326,023.74 | 174,326,023.74 | |
| Including: Interest payable | |||
| Dividends payable | 1,032,818.86 | 1,032,818.86 | |
| Liabilities held for sale | |||
| Non-current liabilities maturing within one year | 2,700,000.00 | 2,700,000.00 | |
| Other current liabilities | |||
| Total current liabilities | 315,822,723.93 | 315,822,723.93 | |
| Non-current liabilities: | |||
| Long-term loans | 1,489,984.87 | 1,489,984.87 | |
| Bonds payable | |||
| Including: preference shares | |||
| Perpetual bond | |||
| Lease liability | |||
| Long-term payables | 1,574,312.63 | 1,574,312.63 | |
| Long-term employee benefits payable | |||
| Estimated liabilities | |||
| Deferred income | |||
| Deferred income tax liabilities | 1,197,067.41 | 1,197,067.41 | |
| Other non-current liabilities | 520,000.00 | 520,000.00 | |
| Total non-current liabilities | 4,781,364.91 | 4,781,364.91 | |
| Item | December 31, 2018 | January 1, 2019 | Adjustment |
| Total liabilities | 320,604,088.84 | 320,604,088.84 | |
| Owners' equity: | |||
| Share capital | 548,589,600.00 | 548,589,600.00 | |
| Other equity instruments | |||
| Including: preference shares | |||
| Perpetual bond | |||
| Capital reserves | 1,003,282,687.73 | 1,003,282,687.73 | |
| Less: treasury stock | |||
| Other comprehensive income | 12,396,555.80 | 59,336,941.21 | 46,940,385.41 |
| Special reserves | |||
| Surplus reserves | 4,546,242.52 | 4,546,242.52 | |
| Undistributed profits | -110,993,832.78 | -98,600,204.26 | 12,393,628.52 |
| Total owners' equity | 1,457,821,253.27 | 1,517,155,267.20 | 59,334,013.93 |
| Total liabilities and owners' equity | 1,778,425,342.11 | 1,837,759,356.04 | 59,334,013.93 |
Notes of adjustment: not applicable.
6. Tax
(1) Major taxes and tax rates
| Tax type | Basis of tax assessment | Tax rate |
| Value-added tax (VAT) | Calculated based on the income from sales of goods and the provision of taxable labor services according to tax law, and value added tax payable should be the balance of the output tax for the period after deducting the deductible input tax for the period. | 3%、5%、6%、7%、11%、10%、16%、17%、19% |
| consumption tax | ||
| Business tax | ||
| Urban maintenance and construction tax | Levied based on the actual payment of business tax and VAT. | 1%、5%、7% |
| Enterprise income tax (EIT) | Levied based on the taxable income | 16%-38%、15%、25% |
| Education surtax and local education sutax | Levied based on the actual payment of VAT. | 3%、2%、1% |
Note: The VAT rate applicable to DAAG and its subsidiaries is 19% or 7%.
If there are different corporate income tax rate taxpayers, see the disclosure statement
| Tax subject name | Income tax rate（%） |
| Dürkopp Adler AG | 16-38 |
| DAP (Vietnam) Co., Ltd. | 20 |
| Zhejiang ShangGong GEMSY Co., Ltd. | 15 |
| Dürkopp Adler Manufacturing(Shanghai) Co.,Ltd. | 15 |
| SG Richpeace | 15 |
(2) Tax incentives
The Company’S subsidiary Zhejiang ShangGong GEMSY Co., Ltd.,, Dürkopp AdlerManufacturing(Shanghai) Co.,Ltd.,, Tianjin Richpeace are state-level high-tech enterprises, enjoyingcorporate income tax at 15%.The Company and all subsidiaries in Mainland China are entitled to a tax benefit of 75% deduction forresearch and development expenses.
Shanghai ShangGong Financial Leasing Co., Ltd.,, a subsidiary of the Company, provides tangiblemovable property financing leasing services and tangible movable property financing after-sales leasebackservices, and enjoys the tax incentives for the portion of the VAT that exceeds 3% of the actual tax burden.
The Company’S three-tier subsidiary Shenzhen Yingruiheng Technology Co., Ltd. and TianjinYingrui’an Technology Co., Ltd. sell their own software products developed and produced, and enjoy thetax rebate of the part of the VAT actual tax burden of more than 3%.
7. Notes to Items of Consolidated Financial Statements
(1) Cash and cash equivalents
| Item | Ending Balance | Beginning Balance |
| Cash on hand | 697,634.16 | 743,089.39 |
| Bank deposit | 687,708,199.44 | 556,653,249.22 |
| Other monetary funds | 36,748,447.24 | 37,637,807.50 |
| Total | 725,154,280.84 | 595,034,146.11 |
| Including: total amount of cash and cash equivalents offshore | 430,282,710.62 | 261,229,432.22 |
Details of cash and cash equivalents restricted for use due to mortgage, pledge or freezing are follows:
| Item | Ending Balance | Beginning Balance |
| Bank Acceptance Deposit Guarantee (Note 1) | 32,140,604.00 | 35,374,936.26 |
| Security deposit (Note 2) | 716,855.75 | 712,626.09 |
| Deposit held for foreign exchange inspection (Note 3) | 320,809.99 | 320,825.64 |
| Total | 33,178,269.74 | 36,792,523.72 |
Note 1: The balance as of June 30, 2019 is the monetary fund that SGGEMSY and Richpeace, whichare subsidiaries of the Company, cannot withdraw at any time due to the opening of bank acceptance bills. .Note 2: The balance as of June 30, 2019 is the electricity security deposit of Richpeace, a subsidiary ofthe Company, and the counterfeit deposit of Shanghai Butterfly Import & Export Co., Ltd., a third-levelsubsidiary of the Company.Note 3: The balance of June 30, 2019 is the retained funds obtained by the Shanghai Butterfly Importand Export Co., Ltd., a third-level subsidiary of the Company, in the import and export trade that have notbeen transferred to the general trade account without being reviewed by the foreign exchange authorities.
(2) Transactional Financial Assets
| Item | Ending Balance | Beginning Balance |
| Financial assets at fair value whose fluctuation is attributed to profit and loss for current period | 90,854,497.33 | 86,406,778.33 |
| In which： | ||
| Transactional Equity Instrument Investment | 90,854,497.33 | 86,406,778.33 |
| Financial assets designated to be measured at fair value and their changes recorded in current profits and losses | ||
| In which： | ||
| Equity Instrument Investment | ||
| Total | 90,854,497.33 | 86,406,778.33 |
(3) Derivative Financial Assets
Not applicable.
(4) Notes receivable
A. Presentation of notes receivable by category
| Item | Ending Balance | Beginning Balance |
| Bank acceptance bills | 58,325,246.02 | 71,718,740.15 |
| Commercial acceptance bills | 1,720,863.77 | 9,763,411.00 |
| Total | 60,046,109.79 | 81,482,151.15 |
B. Notes receivable pledged as at the end of period
| Item | Ending Balance |
| Bank acceptance bills | 1,639,448.00 |
| Commercial acceptance bills | |
| Total | 1,639,448.00 |
C. Notes receivable endorsed or discounted at the end of the period and have not yet expired at thebalance sheet date
| Item | Closing confirmed amount | Closing unconfirmed amount |
| Bank acceptance bills | 54,481,507.61 | |
| Commercial acceptance bills | ||
| Total | 54,481,507.61 |
D. Notes receivable transferred to accounts receivable due to the issuer’s performance failureNot applicable.
(5) Accounts Receivable
A. Disclosure of accounts receivable by aging
| Aging | Ending Balance |
| Within 1 year | 631,707,028.18 |
| 1-2 years | 4,961,247.64 |
| 2-3 years | 1,487,321.93 |
| Over 3 years | 82,927,144.25 |
| Total | 721,082,742.00 |
B. Disclosure of accounts receivable by bad debt provision method
| Type | Ending Balance | Beginning Balance | ||||||||
| Book balance | Provision for bad debt | Book Value | Book balance | Provision for bad debt | Book Value | |||||
| Amount | % | Amount | % | Amount | % | Amount | % | |||
| Provision for bad debts on a single basis | 517,356,917.17 | 71.75 | 46,177,825.74 | 8.93 | 464,459,668.00 | 440,439,810.40 | 67.79 | 40,428,917.39 | 9.18 | 400,010,893.01 |
| Provision for bad debts by portfolio | 203,725,824.83 | 28.25 | 72,582,596.85 | 35.63 | 137,862,651.41 | 209,297,564.65 | 32.21 | 73,592,992.61 | 35.16 | 135,704,572.04 |
| Total | 721,082,742.00 | 100.00 | 118,760,422.59 | 16.47 | 602,322,319.41 | 649,737,375.05 | 100.00 | 114,021,910.00 | 17.55 | 535,715,465.05 |
Provision for bad debts made on an individual basis at the end of report period
| Name | Ending Balance | |||
| Accounts receivable | Provision for bad debts | Provision ratio (%) | Reason for provision | |
| Customer 2 | 19,659,755.00 | 19,659,755.00 | 100.00 | Estimated not recoverable |
| Customer 3 | 18,176,864.00 | 386,675.15 | 2.13 | Estimated partially not recoverable |
| Receivables guaranteed by financial institutions | 55,407,380.32 | 277,036.90 | 0.50 | Estimated partially not recoverable |
| Accounts receivable of SGG (Parent company) | 19,446,122.98 | 12,675,163.63 | 65.18 | Estimated partially not recoverable |
| Accounts receivable of ShangGong Butterfly | 6,047,924.76 | 6,047,924.76 | 100.00 | Estimated not recoverable |
| Accounts receivable of DAPSH | 9,027,263.43 | 774,608.50 | 8.58 | Estimated partially not recoverable |
| Accounts receivable of DA AG | 241,317,373.08 | 6,268,413.45 | 2.60 | Estimated partially not recoverable |
| Accounts receivable of SGSB Electronic Company | 11,610.00 | 11,610.00 | 100.00 | Estimated not recoverable |
| Accounts receivable of SHENSY | 144,003,898.84 | 76,638.35 | 0.50 | Estimated partially not recoverable |
| Accounts receivable of DAP Vietnam | 1,415,930.19 | Estimated recoverable | ||
| Accounts receivable of Richpeace | 2,842,794.57 | Estimated recoverable | ||
| Total | 517,356,917.17 | 46,177,825.74 | 8.93 | / |
Accounts receivable with provision for bad debt made using the aging analysis method among theportfolios:
| Name | Ending Balance | ||
| Accounts receivable | Provision for bad debts | Provision ratio (%) | |
| Within 1 year | 133,084,809.40 | 6,654,240.48 | 5.00 |
| 1 to 2 years | 4,961,247.64 | 992,249.53 | 20.00 |
| 2 to 3 years | 1,487,321.93 | 743,660.98 | 50.00 |
| Over 3 years | 64,192,445.86 | 64,192,445.86 | 100.00 |
| Total | 203,725,824.83 | 72,582,596.85 | 35.63 |
C. Bad debt provision
| Type | Beginning Balance | Change | Ending Balance | |||
| Accure | Recover or reverse | Write off | Accure | |||
| Bad debt provision | 114,021,910.00 | 5,826,703.89 | 970,289.94 | 117,901.36 | 118,760,422.59 | |
| Total | 114,021,910.00 | 5,826,703.89 | 970,289.94 | 117,901.36 | 118,760,422.59 | |
D. Accounts receivable actually written off in current periodNot applicable.
E. Top five accounts receivable by the ending balance of the borrowers
| Company name | Ending balance | ||
| Accounts receivable | Proportion in total accounts receivable (%) | Provision for bad debts | |
| Customer 1 | 31,176,789.40 | 4.32 | 155,883.95 |
| Customer 2 | 19,659,755.00 | 2.73 | 19,659,755.00 |
| Customer 3 | 18,176,864.00 | 2.52 | 386,675.15 |
| Customer 4 | 16,010,701.32 | 2.22 | 80,053.51 |
| Customer 5 | 12,608,352.58 | 1.75 | 63,041.76 |
| Total | 97,632,462.30 | 13.54 | 20,345,409.37 |
F. Receivables derecognized due to transfer of financial assetsNot applicable.
G. Transfer of accounts receivable and continued involvement in the formation of assets,liabilitiesNot applicable.
Note: For details of the arrears of related parties in the accounts receivable at the end of the period, pleaserefer to Note XII. (6) Accounts payable by related parties.
(6) Receivable Financing
Not applicable.
(7) Prepayment
A. Presentation of prepayments by aging
| Aging | Ending Balance | Beginning Balance | ||
| Amount | % | Amount | % | |
| Within 1 year | 60,173,528.17 | 89.90 | 33,268,163.01 | 83.81 |
| 1-2 years | 574,510.33 | 0.86 | 257,817.83 | 0.65 |
| 2-3 years | 42,281.13 | 0.06 | 15,583.50 | 0.04 |
| Over 3 years | 6,147,650.83 | 9.18 | 6,154,198.51 | 15.50 |
| Total | 66,937,970.46 | 100.00 | 39,695,762.85 | 100.00 |
B. Top five prepayments to prepaid object in terms of their ending balance
| Prepaid object | Ending Balance | Proportion in Total Ending Balance of Advances to Suppliers (%) |
| No.1 | 10,695,000.00 | 15.98 |
| No.2 | 6,147,650.83 | 9.18 |
| No.3 | 4,195,782.71 | 6.27 |
| No.4 | 3,480,711.49 | 5.20 |
| No.5 | 3,450,000.00 | 5.15 |
| Total | 27,969,145.03 | 41.78 |
Note: For the arrears of related parties in the prepayments at the end of the period, please refer to “12. (6)Accounts payable by related parties”.
(8) Other receivables
| Item | Ending Balance | Beginning Balance |
| Interest receivable | ||
| Dividends receivable | 27,041,989.94 | |
| Other receivables | 88,782,983.97 | 93,288,652.56 |
| Total | 88,782,983.97 | 120,330,642.50 |
Interest receivableNot applicable.
Dividends receivable
| Item | Ending Balance | Beginning Balance |
| H.Stoll AG & Co.KG | 27,041,989.94 | |
| Total | 27,041,989.94 |
Note: DA AG completed the transfer of 26% of the shares held by Stoll in the current period and recoveredthe dividends to be distributed.
Other receivablesA. By aging
| Aging | Ending Balance |
| Within 1 year | 90,593,471.91 |
| 1-2 years | 411,809.06 |
| 2-3 years | 368,312.84 |
| Over 3 years | 33,366,676.94 |
| Total | 124,740,270.75 |
B. By nature
| Nature | Ending balance | Beginning balance |
| Receivables from government agencies and institutions | 17,621,194.43 | 17,823,075.77 |
| Deposit in security | 36,806,947.03 | 44,239,906.50 |
| Employee Standby Fund and Employee Collection and Payment | 759,149.92 | 1,942,944.76 |
| Current account | 69,552,979.37 | 64,995,266.26 |
| Total | 124,740,270.75 | 129,001,193.29 |
C. Provision for bad debts
| Provision for bad debts | The first stage | The second stage | The third stage | Total |
| Expected credit losses in the next 12 months | Expected credit loss for the entire duration (no credit impairment) | Expected credit loss for the entire duration (credit impairment has occurred) | ||
| Balance on January 1, 2019 | 2,079,345.56 | 266,518.23 | 33,366,676.94 | 35,712,540.73 |
| The balance of January 1, 2019 is in this period | ||||
| -- Transfer to the second stage | ||||
| -- Transfer to the third stage | ||||
| -- Turn back to the second stage | ||||
| -- Turn back to the first stage |
| Accrue in report period | 419,858.03 | 419,858.03 | ||
| Recover in report period | 175,111.98 | 175,111.98 | ||
| Reverse in report period | ||||
| Write-off | ||||
| Other change | ||||
| Balance on June 30, 2019 | 2,324,091.61 | 266,518.23 | 33,366,676.94 | 35,957,286.78 |
D. Provision for bad debts
| Type | Begingning balance | Change | Ending balance | ||
| Accual | Reversal or recovery | Write-off | |||
| Other receivables bad debt provision | 35,712,540.73 | 419,858.03 | 175,111.98 | 35,957,286.78 | |
| Total | 35,712,540.73 | 419,858.03 | 175,111.98 | 35,957,286.78 | |
E. Other receivables actually write-off in the current periodNot applicable.
F. Top five other receivables in terms of their ending balance
| Name | Nature | Ending Balance | Age | % of Total other receivables | Ending Balance of Provision for Bad Debts |
| Customer A | Current accounts | 14,125,990.90 | From within 1 year to over 3 years | 11.32 | 14,125,990.90 |
| Customer B | Current accounts | 13,972,876.30 | 1-2 years | 11.20 | 1,743,643.82 |
| Customer C | Export tax rebate | 11,650,521.57 | Within 1 year | 9.34 | 58,252.61 |
| Customer D | Security deposit | 4,300,000.00 | Within 1 year | 3.45 | 21,500.00 |
| Customer E | Security deposit | 3,500,000.00 | Within 1 year | 2.81 | 17,500.00 |
| Total | / | 47,549,388.77 | / | 38.12 | 15,966,887.33 |
G. Receivables involving government grantsNot applicable.
H. Other receivables derecognized due to the transfer of financial assetsNot applicable.
I. Amount of assets and liabilities transferred from other receivables and continue to be involvedNot applicable.
Note: For details of the related party's arrears at the end of the period, please refer to Note XII. (6) Relatedparty receivables and payables.
(9) Inventories
A. Classification of inventories
| Item | Ending Balance | Beginning Balance | ||||
| Book balance | Provision for impairment | Book value | Book balance | Provision for impairment | Book value | |
| Raw materials | 356,314,574.16 | 57,568,727.38 | 298,745,846.78 | 344,109,150.92 | 57,005,053.46 | 287,104,097.46 |
| Goods in progress | 281,145,088.90 | 39,624,184.91 | 241,520,903.99 | 243,900,021.71 | 39,753,513.85 | 204,146,507.86 |
| Finished goods | 338,778,719.26 | 40,973,046.49 | 297,805,672.77 | 301,330,071.32 | 40,953,279.20 | 260,376,792.12 |
| Revolving materials | 1,928,857.33 | 1,087,930.60 | 840,926.73 | 1,847,268.54 | 1,158,016.41 | 689,252.13 |
| Consigned processing materials | 5,192,430.15 | 5,192,430.15 | 1,312,325.29 | 1,312,325.29 | ||
| Dispatched goods | 25,048,510.46 | 25,048,510.46 | 32,403,336.09 | 32,403,336.09 | ||
| Semi finished product | 13,135,039.87 | 505,376.85 | 12,629,663.02 | 10,818,745.22 | 505,376.85 | 10,313,368.37 |
| Labor cost | 91,218,826.12 | 91,218,826.12 | 100,632,205.51 | 100,632,205.51 | ||
| Total | 1,112,762,046.25 | 139,759,266.23 | 973,002,780.02 | 1,036,353,124.60 | 139,375,239.77 | 896,977,884.83 |
Note: The Company’s semi finished products include intelligent equipment projects that have not yet beenassembled.
B. Inventory depreciation reserve and contract performance cost impairment provision
| Item | Beginning Balance | Increase in current period | Decrease in current period | Ending Balance | ||
| Provision | Others | Reversal or write-off | Others | |||
| Raw materials | 57,005,053.46 | 728,822.37 | 165,148.45 | 57,568,727.38 | ||
| Goods in progress | 39,753,513.85 | 14,383.54 | 30,974.63 | 112,737.85 | 39,624,184.91 | |
| Finished goods | 40,953,279.20 | 210,779.70 | 159,509.48 | 31,502.93 | 40,973,046.49 | |
| Revolving materials | 1,158,016.41 | 70,085.81 | 1,087,930.60 | |||
| Semi finished product | 505,376.85 | 505,376.85 | ||||
| Total | 139,375,239.77 | 953,985.61 | 260,569.92 | 309,389.23 | 139,759,266.23 | |
C. Explanation of the amount of capitalization of borrowing costs in the ending balance of inventoryNot applicable.
(10) Assets held for Sale
Not applicable.
(11) Non-current Assets Maturing within One Year
Not applicable.
(12) Other Current Assets
| Item | Ending Balance | Beginning Balance |
| Unamortized expense | 243,489.92 | 565,112.42 |
| Input tax to be credited | 12,517,618.01 | 15,243,281.57 |
| Rentals and insurance fees | 620,477.79 | 2,580,239.87 |
| Overpaid enterprise income tax | 74,705,746.68 | 50,937,701.45 |
| Structured deposit | 119,000,000.00 | 180,000,000.00 |
| Total | 207,087,332.40 | 249,326,335.31 |
(13) Debt Investment
Not applicable.
(14) Other Debt investment
Not applicable.
(15) Long-term receivables
| Item | Ending Balance | Beginning Balance | Discount Rate | ||||
| Book balance | Provision for bad debt | Book value | Book balance | Provision for bad debt | Book value | ||
| Financing lease | 60,884,478.09 | 60,884,478.09 | 31,427,418.92 | 31,427,418.92 | |||
| Of which: unrealized financing income | 9,471,611.91 | 9,471,611.91 | 5,591,540.26 | 5,591,540.26 | |||
| Total | 60,884,478.09 | 60,884,478.09 | 31,427,418.92 | 31,427,418.92 | / | ||
(16) Long-term equity investment
| Investees | Beginning Balance | Change in current period | Ending Balance | Ending Balance of Provision of Impairment | |||||||
| Increase in Investment | Decrease in Investment | Return on Investment under Equity Method | Other Comprehensive Income Adjustment | Other Changes in Equity | Declared Cash Dividends or Profit | Other | Increase in Investment | ||||
| H. Stoll AG & Co. KG | 248,368,207.89 | 248,368,207.89 | 0 | ||||||||
Note: DA AG completed the transfer of a 26% stake in Stoll.
(17) Other Equity Investment
| Item | Ending Balance | Beginning Balance |
| Non-listed company equity | 93,257,774.18 | 90,663,190.66 |
| Total | 93,257,774.18 | 90,663,190.66 |
(18) Other Non-current Financial Assets
Not applicable.
(19) Investment Properties
A. Investment property measured at cost
| Item | Buildings and Constructions | Leased Land Use Rights | Investment Real Estate Decoration | Total |
| 1. Original book value | ||||
| (1) Beginning balance | 229,018,510.26 | 50,523,752.24 | 2,583,492.92 | 282,125,755.42 |
| (2) Increase in current period | ||||
| ① Outsourcing | ||||
| ② Transfer in from inventories, fixed assets or construction in progress | ||||
| ③ Increase from business combination | ||||
| (3) Decrease in current period | 360,423.22 | 360,423.22 | ||
| ① Disposal | ||||
| ② Others | ||||
| ③ Exchange rate fluctuation | 360,423.22 | 360,423.22 | ||
| 4.Ending Balance | 228,658,087.04 | 50,523,752.24 | 2,583,492.92 | 281,765,332.20 |
| 2. Accumulated depreciation and accumulated amortization | ||||
| (1) Beginning balance | 110,814,471.54 | 17,287,325.55 | 861,164.76 | 128,962,961.85 |
| (2) Increase in current period | 2,801,096.42 | 552,001.62 | 252,499.28 | 3,605,597.32 |
| ①Amortization or accrual | 2,801,096.42 | 552,001.62 | 252,499.28 | 3,605,597.32 |
| (3) Decrease in current period | 79,290.18 | 79,290.18 | ||
| ①Disposal | ||||
| ② Others | ||||
| ③ Exchange rate fluctuation | 79,290.18 | 79,290.18 | ||
| (4) Ending balance | 113,536,277.78 | 17,839,327.17 | 1,113,664.04 | 132,489,268.99 |
| 3. Provision for impairment | ||||
| (1) Beginning balance | 7,776,658.45 | 7,776,658.45 | ||
| (2) Increase in current period | ||||
| ①Accrual | ||||
| (3) Decrease in current period | 30,027.24 | 30,027.24 | ||
| ①Disposal | ||||
| ②Others | ||||
| ③ Exchange rate fluctuation | 30,027.24 | 30,027.24 | ||
| (4) Ending balance | 7,746,631.21 | 7,746,631.21 | ||
| 4. Book value | ||||
| (1) Book value at the end of the period | 107,375,178.05 | 32,684,425.07 | 1,469,828.88 | 141,529,432.00 |
| (2) Book value at the beginning of the period | 110,427,380.27 | 33,236,426.69 | 1,722,328.16 | 145,386,135.12 |
(20) Fixed Assets
| Item | Ending Balance | Beginning Balance |
| Fixed assets | 473,459,229.06 | 473,157,221.59 |
| Liquidation of Fixed Assets | ||
| Total | 473,459,229.06 | 473,157,221.59 |
Fixed assets
A. Fixed assets
| Item | Buildings and Constructions | Machinery Equipment | Transportation Equipment | Electronic Equipment | Other Equipment | Total |
| 1. Original book value | ||||||
| (1) Beginning balance | 529,909,913.71 | 419,337,123.33 | 20,888,060.43 | 7,359,112.39 | 300,780,133.58 | 1,278,274,343.44 |
| (2) Increase in current period | 3,105,748.27 | 14,241,306.12 | 1,754,571.95 | 362,221.57 | 9,834,401.24 | 29,298,249.15 |
| ① Purchase | 1,714,322.27 | 8,629,702.63 | 1,754,571.95 | 362,221.57 | 7,989,589.24 | 20,450,407.66 |
| ② Transfer from construction in progress | 1,391,426.00 | 5,299,926.00 | 1,844,812.00 | 8,536,164.00 | ||
| ③ Increase from business combination | ||||||
| ④Exchange rate fluctuation | 311,677.49 | 311,677.49 | ||||
| (3) Decrease in current period | 936,170.13 | 3,740,193.85 | 451,363.82 | 130,965.01 | 1,829,135.04 | 7,087,827.85 |
| ①Disposal or scrap | 3,740,193.85 | 451,363.82 | 130,965.01 | 1,829,135.04 | 6,151,657.72 | |
| ② Exchange rate fluctuation | 936,170.13 | 936,170.13 | ||||
| (4) .Ending Balance | 532,079,491.85 | 429,838,235.60 | 22,191,268.56 | 7,590,368.95 | 308,785,399.78 | 1,300,484,764.74 |
| 2. Accumulated depreciation | ||||||
| (1) Beginning balance | 257,432,056.90 | 274,509,114.01 | 10,948,812.97 | 5,669,194.63 | 244,071,340.52 | 792,630,519.03 |
| (2) Increase in current period | 6,540,746.78 | 11,205,735.05 | 1,207,177.09 | 586,521.14 | 7,866,950.76 | 27,407,130.82 |
| ①Accrual | 6,540,746.78 | 10,569,060.81 | 1,207,177.09 | 586,521.14 | 7,798,714.35 | 26,702,220.17 |
| ②Exchange rate fluctuation | 636,674.24 | 68,236.41 | 704,910.65 | |||
| (3) Decrease in current period | 427,957.06 | 2,945,795.23 | 363,138.52 | 71,276.00 | 1,652,172.26 | 5,460,339.07 |
| ①Disposal or scrap | 2,945,795.23 | 363,138.52 | 71,276.00 | 1,652,172.26 | 5,032,382.01 | |
| ②Exchange rate fluctuation | 427,957.06 | 42,7957.06 | ||||
| (4) Ending balance | 263,544,846.62 | 282,769,053.83 | 11,792,851.54 | 6,184,439.77 | 250,286,119.02 | 814,577,310.78 |
| 3. Provision for impairment | ||||||
| (1) Beginning balance | 4,913,777.92 | 7,485,432.76 | 48,170.70 | 37,818.61 | 1,402.83 | 12,486,602.82 |
| (2) Increase in current period | ||||||
| ①Accrual | ||||||
| (3) Decrease in current period | 38,377.92 | 38,377.92 | ||||
| ① Disposal or scrap | 38,377.92 | 38,377.92 | ||||
| (4) Ending balance | 4,913,777.92 | 7,447,054.84 | 48,170.70 | 37,818.61 | 1,402.83 | 12,448,224.90 |
| 4. Book value | ||||||
| (1) Book value at the end of the period | 263,620,867.31 | 139,622,126.93 | 10,350,246.32 | 1,368,110.57 | 58,497,877.93 | 473,459,229.06 |
| (2) Book value at the beginning of the period | 267,564,078.89 | 137,342,576.56 | 9,891,076.76 | 1,652,099.15 | 56,707,390.23 | 473,157,221.59 |
B. Idle fixed assetsNot applicable.
C. Fixed assets leased through finance leases
| Item | Book value | Accumulated depreciation | Impairment | Book value |
| Machinery and equipment | 5,817,491.21 | 897,380.08 | 4,920,111.13 | |
| Transportation Equipment | 4,851,467.85 | 982,002.55 | 3,869,465.30 | |
| Total | 10,668,959.06 | 1,879,382.63 | 8,789,576.43 |
D. Fixed assets leased out through operating leases
| Item | Ending Book Value |
| Machinery and equipment | 120,960.00 |
| Electronic equipment | 175,960.00 |
| Total | 296,920.00 |
E. Fixed assets without certificate of title
| Item | Book value | Reason for failure in completing the formalities for obtaining certificates of title |
| Buildings and constructions | 1,680,568.58 | Self-built housing, the certificates are in the process |
Note: Self-built housing for the Company’s subsidiary Shanghai SGSB Asset Management Co., Ltd.
Note: For details of the restrictions on fixed assets mortgage, please refer to “VII. (70) Assets with limitedownership or use rights and 14. (II) Contingencies”.
Liquidation of Fixed AssetsNot applicable.
(21) Construction in Progress
| Item | Ending Balance | Beginning Balance |
| Construction in Progress | 161,615,652.26 | 119,166,627.75 |
| Construction materials | ||
| Total | 161,615,652.26 | 119,166,627.75 |
Construction in Progress
(1). Construction in Progress
| Item | Ending Balance | Beginning Balance | ||||
| Book balance | Provision for impairment | Book value | Book balance | Provision for impairment | Book value | |
| Household multifunctional sewing machine | 1,304,367.87 | 1,304,367.87 | 1,304,367.87 | 1,304,367.87 | ||
| Software development project | 1,581,983.08 | 1,581,983.08 | 1,589,858.17 | 1,589,858.17 | ||
| Sewing Equipment Engineering | 12,166,019.41 | 12,166,019.41 | 14,361,655.65 | 14,361,655.65 | ||
| Bensheim facility project | 33,244,900.85 | 33,244,900.85 | 7,140,762.85 | 7,140,762.85 | ||
| Modern logistics management center | 59,113,440.42 | 59,113,440.42 | 54,755,378.01 | 54,755,378.01 | ||
| Taizhou manufacturing base project | 42,507,979.24 | 42,507,979.24 | 28,259,697.79 | 28,259,697.79 | ||
| Construction Project | 3,668,503.07 | 3,668,503.07 | 6,269,885.19 | 6,269,885.19 | ||
| Equipment project | 1,658,791.21 | 1,658,791.21 | 1,657,178.48 | 1,657,178.48 | ||
| Production process improvement project | 6,369,667.11 | 6,369,667.11 | 3,827,843.74 | 3,827,843.74 | ||
| Total | 161,615,652.26 | 161,615,652.26 | 119,166,627.75 | 119,166,627.75 | ||
(2). Changes in major construction in progress for current period
| Item | Budget | Beginning balance | Increase in current period | Amount Transferred in Fixed Assets for the Current Period | Other decreases in current period | Ending balance | Proportion of the accumulated investment in project in budget (%) | Construction in progress | Accumulated amount of interest capitalization | Including: amount of interest capitalization in 2017 | Interest capitalization rate in 2017(%) | Source of Fund |
| Household multifunctional sewing machine | 1,304,367.87 | 1,304,367.87 | Self-owned | |||||||||
| Software development project | 1,589,858.17 | 161,773.58 | 169,648.67 | 1,581,983.08 | Self-owned/ raised | |||||||
| Sewing Equipment Engineering | 14,361,655.65 | 941,615.68 | 3,117,390.97 | 19,860.95 | 12,166,019.41 | Self-owned | ||||||
| Bensheim base project | 7,140,762.85 | 26,136,472.32 | 32,334.32 | 33,244,900.85 | Self-owned | |||||||
| Modern logistics management center | 54,755,378.01 | 4,358,062.41 | 59,113,440.42 | Self-owned |
| Taizhou manufacturing project | 28,259,697.79 | 14,248,281.45 | 42,507,979.24 | Self-owned | ||||||||
| Construction Project | 6,269,885.19 | 2,864,783.06 | 5,418,773.03 | 47,392.15 | 3,668,503.07 | Self-owned | ||||||
| Equipment project | 1,657,178.48 | 1,612.73 | 1,658,791.21 | Self-owned/ raised | ||||||||
| Production process improvement project | 3,827,843.74 | 2,541,823.37 | 6,369,667.11 | Self-owned | ||||||||
| Total | 119,166,627.75 | 51,254,424.60 | 8,536,164.00 | 269,236.09 | 161,615,652.26 | / | / | / | / |
Note 1: For details of the mortgage restrictions of construction in progress, see Note 7. (79) Assetswith limited ownership or use rights.Note 2: The software development project was transferred to intangible assets after partial acceptancethis year.
Construction MaterialsNot applicable.
(22) Productive Biological Assets
Not applicable.
(23) Oil and gas Assets
Not applicable.
(24) Use-of-right Assets
Not applicable.
(25) Intangiable Assets
A. Intangible assets
| Item | Land Use Right | Patent and Non-patent Technology | Trademark Use Right | Computer Software | Others | Total |
| 1. Original book value | ||||||
| (1) Beginning balance | 168,971,907.27 | 198,219,514.39 | 32,161,268.51 | 9,029,323.41 | 6,222,908.90 | 414,604,922.48 |
| (2) Increase in current period | 14,868,521.00 | 233,432.42 | 1,176,900.00 | 16,278,853.42 | ||
| ① Purchase | 4,159,231.00 | 59,203.02 | 1,176,900.00 | 5,395,334.02 | ||
| ② R & D | ||||||
| ② Increase from business conbination | ||||||
| ③Exchange rate fluctuation | 4,580.73 | 4,580.73 | ||||
| ②Transfer from construction in progress/ development expenditure | 10,709,290.00 | 169,648.67 | 10,878,938.67 | |||
| (3) Decrease in current period | 251,143.92 | 24,027.90 | 275,171.82 | |||
| ① Disposal | ||||||
| ②Exchange rate fluctuation | 251,143.92 | 24,027.90 | 275,171.82 | |||
| (4) .Ending Balance | 168,971,907.27 | 212,836,891.47 | 32,161,268.51 | 9,262,755.83 | 7,375,781.00 | 430,608,604.08 |
| 2. Accumulated amortization | ||||||
| (1) Beginning balance | 14,746,217.28 | 99,844,555.33 | 20,561,268.51 | 3,157,623.12 | 6,222,908.90 | 144,532,573.14 |
| (2) Increase in current period | 2,091,418.68 | 12,772,655.81 | 600,000.00 | 768,736.00 | 29,863.89 | 16,262,674.38 |
| ① Accrual | 2,091,418.68 | 12,772,655.81 | 600,000.00 | 764,155.27 | 29,863.89 | 16,258,093.65 |
| ② Exchange rate | 4,580.73 | 4,580.73 |
| Item | Land Use Right | Patent and Non-patent Technology | Trademark Use Right | Computer Software | Others | Total |
| fluctuation | ||||||
| (3) Decrease in current period | 24,027.90 | 24,027.90 | ||||
| ① Disposal | ||||||
| ② Exchange rate fluctuation | 24,027.90 | 24,027.90 | ||||
| 4.Ending Balance | 16,837,635.96 | 112,617,211.14 | 21,161,268.51 | 3,926,359.12 | 6,228,744.89 | 160,771,219.62 |
| 3. Provision for impairment | ||||||
| (1) Beginning balance | ||||||
| (2) Increase in current period | ||||||
| ① Accrual | ||||||
| (3) Decrease in current period | ||||||
| ① Disposal | ||||||
| (4) Ending balance | ||||||
| 4. Book value | ||||||
| (1) Book value at the end of the period | 152,134,271.31 | 100,219,680.33 | 11,000,000.00 | 5,336,396.71 | 1,147,036.11 | 269,837,384.46 |
| (2) Book value at the beginning of the period | 154,225,689.99 | 98,374,959.06 | 11,600,000.00 | 5,871,700.29 | 270,072,349.34 |
For details of the intangible assets mortgage, please refer to “VII. (79) Assets with limited ownership or userights” in this note.
(26) Development Expenditures
| Item | Beginning Balance | Increase in current period | Decrease in current period | Ending balance | |
| Internal Development Expenditure | Recognized as Intangible Assets | Transferred to Current Profits and Losses | |||
| Sewing equipment | 6,194,539.04 | 13,266,497.11 | 10,709,290.00 | 8,751,746.15 | |
| Freight platform | 603,773.44 | 150,943.52 | 754,716.96 | ||
| Total | 6,798,312.48 | 13,417,440.63 | 10,709,290.00 | 9,506,463.11 | |
Note: The development expenditures of sewing equipment represent the development costs of DA AG andDAMSH. The development expenditures of Freight platform represent the development costs of SHENSY.
(27) Goodwill
A. Book value of goodwill
| Name of investee or goodwill formation events | Beginning Balance | Increase in Current Period | Decrease in Current Period | Ending Balance | |
| Acquisition | Disposal | Exchange Rate Fluctuation | |||
| PFAFF GmbH | 72,900,075.74 | 281,481.82 | 72,618,593.92 | ||
| Beisler | 22,863,893.28 | 88,282.08 | 22,775,611.20 | ||
| Richpeace | 77,544,194.54 | 77,544,194.54 | |||
| Total | 173,308,163.56 | 369,763.90 | 172,938,399.66 | ||
B. Provision for impairment of goodwill
| Name of investee or goodwill formation events | Beginning Balance | Increase in Current Period | Decrease in Current Period | Ending Balance | |
| Accural | Disposal | Exchange Rate Fluctuation | |||
| Beisler | 22,863,893.28 | 88,282.08 | 22,775,611.20 | ||
| PFAFF GmbH | 10,370,000.00 | 40,040.63 | 10,329,959.37 | ||
| Total | 33,233,893.28 | 128,322.71 | 33,105,570.57 | ||
C. Information about the asset group or asset group combination in which the goodwill is located
The Company’s goodwill belongs to the sewing equipment and intelligent manufacturing equipmentdivision. After the acquisition, the company re-planned the product portfolio of each subsidiary, and eachsubsidiary independently produced and operated according to the product portfolio planned by the company.Therefore, all the assets of each subsidiary constitute the smallest cash-generating unit. Based on this, theCompany separately treats each subsidiary as a separate asset group, and distributes the goodwill formed bythe acquisition to the corresponding asset group for impairment test.The Company acquired PFAFF and KSL in March 2013. In March 2015, PFAFF absorbed andmerged with KSL. After the merger was completed, KSL became a subsidiary of PFAFF. However, KSL’sproduct portfolio and various business activities remain unchanged and independent of PFAFF. TheCompany still conducts the goodwill impairment test of PFAFF and KSL as different asset groups, and theresults of the goodwill impairment test are disclosed according to the independent legal entity.
(28) Long-term deferred expenses
| Item | Beginning Balance | Increase in Current Period | Amortization in Current Period | Other Decreases in Current Period | Ending Balance |
| Enterprise Mailbox rental expense | 152,640.82 | 33,785.04 | 118,855.78 | ||
| Online brand registration fee | 434,099.93 | 73,365.48 | 360,734.45 | ||
| Landscape engineering | 85,610.70 | 24,460.20 | 61,150.50 | ||
| Leasehold improvements | 2,613,314.69 | 484,105.03 | 233,410.29 | 2,864,009.43 | |
| Tooling cost | 589,743.63 | 76,923.06 | 512,820.57 | ||
| Total | 3,875,409.77 | 484,105.03 | 441,944.07 | 3,917,570.73 |
(29) Deferred income tax assets / deferred income tax liabilities
A. Deferred income tax assets without offset
| Item | Ending Balance | Beginning Balance | ||
| Deductible temporary differences | Deferred income tax assets | Deductible temporary differences | Deferred income tax assets | |
| Receivables | 6,768,626.79 | 2,812,242.21 | ||
| Inventories | 25,015,089.15 | 23,969,903.97 | ||
| Long-term assets | 495,000.00 | 850,120.55 | ||
| Pension (Europe) | 30,038,401.92 | 32,606,465.72 | ||
| Estimated liabilities | 168,180.00 | 168,180.00 | ||
| Other liabilities | 4,263,872.52 | 3,171,305.91 | ||
| Unrealized profits from internal transactions | 8,604,725.23 | 9,942,558.47 | ||
| Offset amount | -2,915,985.59 | -4,669,915.99 | ||
| Total | 72,437,910.02 | 68,850,860.84 | ||
B. Deferred income tax liabilities without offset
| Item | Ending Balance | Beginning Balance | ||
| Taxable temporary differences | Deferred income tax liabilities | Taxable temporary differences | Deferred income tax liabilities | |
| Receivables | 5,837,687.92 | 5,426,063.85 | ||
| Long-term assets | 66,611,260.42 | 65,007,499.07 | ||
| Other liabilities | 7,276,930.73 | 5,041,589.51 | ||
| Offset amount | -2,915,985.59 | -4,669,915.99 | ||
| Total | 76,809,893.48 | 70,805,236.44 | ||
C. Deferred income tax assets or liabilities presented in net amount after offsetNot applicable.
(30) Other Non-current Assets
Not applicable.
(31) Short-term loans
| Item | Ending Balance | Beginning Balance |
| Mortgage loans | 15,000,000.00 | |
| Guaranteed loans | 116,500,000.00 | 157,900,000.00 |
| Credit loans | 179,433,464.04 | 33,714,015.12 |
| Total | 295,933,464.04 | 206,614,015.12 |
Note: For details of the guarantees related to guarantee loans, please refer to “Notes and Contingencies ofthe Fourteenth, (II) Contingencies, Note 2” in this note.
(32) Transactional Financial Liabilities
Not applicable.
(33) Derivative Financial Liabilities
Not applicable.
(34) Notes payable
| Type | Ending Balance | Beginning Balance |
| Bank acceptance bill | 66,510,597.85 | 71,109,160.21 |
| Total | 66,510,597.85 | 71,109,160.21 |
(35) Accounts payable
| Item | Ending Balance | Beginning Balance |
| Payable to suppliers | 214,381,121.77 | 247,693,879.70 |
| Total | 214,381,121.77 | 247,693,879.70 |
(36) Receipt in advance
| Item | Ending Balance | Beginning Balance |
| Advances on sales | 73,995,073.96 | 75,412,987.77 |
| Total | 73,995,073.96 | 75,412,987.77 |
(37) Employee Compensation Payable
A. Employee compensation payable
| Item | Beginning Balance | Increase in current period | Decrease in current period | Ending Balance |
| Short-term remuneration | 81,418,421.69 | 371,075,499.91 | 389,109,574.33 | 63,384,347.27 |
| Post-employment benefits – defined benefit plans | 956,764.30 | 12,610,853.78 | 12,541,311.76 | 1,026,306.32 |
| Dismissal welfare | 262,692.00 | 262,692.00 | ||
| Defined benefit plan maturing within one year | 18,794,283.50 | 9,372,183.00 | 9,841,603.00 | 18,324,863.50 |
| Total | 101,169,469.49 | 393,321,228.69 | 411,755,181.09 | 82,735,517.09 |
B. Short-term remuneration
| Item | Beginning Balance | Increase in Current Period | Decrease in Current Period | Ending Balance |
| (1) Salary, bonus, allowance and subsidy | 61,805,400.44 | 298,116,750.40 | 316,296,795.56 | 43,625,355.28 |
| (2) Employee welfare | 18,754,797.93 | 62,071,209.02 | 62,039,038.42 | 18,786,968.53 |
| (3) Social insurance expenses | 497,539.96 | 6,827,459.86 | 6,926,106.94 | 398,892.88 |
| Item | Beginning Balance | Increase in Current Period | Decrease in Current Period | Ending Balance |
| Including: medical insurance premium | 351,862.77 | 5,777,016.66 | 5,859,536.79 | 269,342.64 |
| Work-related injury insurance premium | 38,179.52 | 393,200.06 | 407,877.34 | 23,502.24 |
| Maternity insurance premium | 27,654.44 | 478,900.54 | 480,350.18 | 26,204.80 |
| Other | 79,843.23 | 178,342.60 | 178,342.63 | 79,843.20 |
| (4) Housing provident funds | 322,745.00 | 3,267,900.20 | 3,166,502.20 | 424,143.00 |
| (5) Labor union expenditures and employee education expenses | 37,938.36 | 792,180.43 | 681,131.21 | 148,987.58 |
| (6) Short-term paid absences | ||||
| (7) short-term profit-sharing plan | ||||
| Total | 81,418,421.69 | 371,075,499.91 | 389,109,574.33 | 63,384,347.27 |
C. Defined contribution plan
| Item | Beginning Balance | Increase in current period | Decrease in current period | Ending Balance |
| Basic endowment insurance premium | 934,217.71 | 12,296,056.96 | 12,221,307.03 | 1,008,967.64 |
| Unemployment insurance premium | 22,546.59 | 290,431.39 | 295,639.30 | 17,338.68 |
| Payment of annuity | 24,365.43 | 24,365.43 | ||
| Total | 956,764.30 | 12,610,853.78 | 12,541,311.76 | 1,026,306.32 |
(38) Taxes and surcharges payable
| Item | Ending Balance | Beginning Balance |
| Value-added tax | 3,742,413.66 | 6,825,857.95 |
| Enterprise income tax | 5,323,300.47 | 8,221,152.27 |
| Individual income tax | 3,846,266.43 | 4,696,274.54 |
| Urban maintenance and construction tax | 308,852.42 | 524,568.34 |
| Educational surtax | 240,367.48 | 417,462.59 |
| Use tax of land | 242,379.84 | 473,407.84 |
| Stamp tax | 6,945.70 | 10,922.70 |
| Others | 2,693.67 | 39,215.94 |
| Total | 13,713,219.67 | 21,208,862.17 |
(39) Other Payables
| Item | Ending Balance | Beginning Balance |
| Interest Payable | 927,338.69 | 805,898.77 |
| Dividends payable | 1,032,818.86 | 1,032,818.86 |
| Other payables | 203,928,214.44 | 252,988,505.87 |
| Total | 205,888,371.99 | 254,827,223.50 |
Interest Payable
| Item | Ending Balance | Beginning Balance |
| Term interest on long-term borrowings due in installments | 468,776.19 | 478,320.87 |
| Short-term loan interest payable | 458,562.50 | 327,577.90 |
| Total | 927,338.69 | 805,898.77 |
Dividends payable
| Item | Ending Balance | Beginning Balance |
| Light Industrial Holding Group Co., Ltd | 959,269.79 | 959,269.79 |
| Privately-owned corporate shares | 73,549.07 | 73,549.07 |
| Total | 1,032,818.86 | 1,032,818.86 |
Other payables
| Item | Ending Balance | Beginning Balance |
| Other payables | 203,928,214.44 | 252,988,505.87 |
| Total | 203,928,214.44 | 252,988,505.87 |
(40) Liabilities Held for Sale
Not applicable.
(41) Non-current liabilities maturing within 1 year
| Item | Ending Balance | Beginning Balance |
| Long-term payable due within one year | 2,700,000.00 | |
| Deferred income due within one year | 921,178.53 | 1,473,297.07 |
| Total | 921,178.53 | 4,173,297.07 |
(42) Other current liabilities
| Item | Ending Balance | Beginning Balance |
| Short-term bond payable | ||
| Interest and rentals | 46,902.00 | 47,083.80 |
| Total | 46,902.00 | 47,083.80 |
(43) Long-Term Loans
| Item | Ending Balance | Beginning Balance |
| Mortgage loans | 79,850,059.00 | 61,821,029.40 |
| Credit loans | 277,586,424.87 | 278,656,620.87 |
| Total | 357,436,483.87 | 340,477,650.27 |
Note: For the description of the related mortgages in the closing balance of the mortgage loan of RMB61,821,029.40 (�7,878,000.00), please refer to “14. Commitments and Contingencies, (2) Contingencies,Note 1”.
(44) Bonds Payable
Not applicable.
(45) Lease Liability
Not applicable.
(46) Long-term Payables
| Item | Ending Balance | Beginning Balance |
| Long-term payables | 2,168,925.47 | 3,403,296.49 |
| Special payable | ||
| Total | 2,168,925.47 | 3,403,296.49 |
Long-term Payables
| Item | Ending Balance | Beginning Balance |
| Financing lease payments | 405,155.28 | 1,853,818.94 |
| Less: unconfirmed financing charges | -213,538.77 | |
| Other | 1,763,770.19 | 1,763,016.32 |
| Total | 2,168,925.47 | 3,403,296.49 |
Special PayableNot applicable.
(47) Long-term Employee Compensation Payable
| Item | Ending Balance | Beginning Balance |
| 1. Post-employment benefits – net liability of defined benefit plan | 225,793,814.95 | 234,036,612.41 |
| 2. Dismissal welfare | ||
| 3. Other long-term benefits | ||
| Total | 225,793,814.95 | 234,036,612.41 |
Defined benefit plan of DA AG is based on supporting commitment. The base of measuringsupporting liability is on actuarial and hypothesis, not only consider known and possessed right to drawdefined benefit plan, but the increase of future payroll and defined benefit plan.
The method used to calculate pension obligations is actuarial. The computation basis includes lifeexpectancy, developed rate, changes in pension, and developed payroll trends.
(48) Estimated Liabilities
| Item | Beginning Balance | Ending Balance | Reason |
| Pending litigation | 672,720.00 | ||
| Total | 672,720.00 | / |
(49) Deferred Income
Not applicable.
(50) Other Non-current Liabilities
| Item | Ending Balance | Beginning Balance |
| Other long-term loan | 520,000.00 | 520,000.00 |
| Total | 520,000.00 | 520,000.00 |
(51) Share Capital
| Beginning Balance | Change in Current Period（+/-） | Ending Balance | |||||
| Issuance of New Shares | Sending shares | Transfer reserve to share capital | Others | Sub-total | |||
| Total | 548,589,600.00 | 548,589,600.00 | |||||
(52) Other Equity Instruments
Not applicable.
(53) Capital Reserves
| Item | Beginning Balance | Increase in Current Period | Decrease in Current Period | Ending Balance |
| Stock premium | 851,345,853.61 | 851,345,853.61 | ||
| Other capital reserves | 64,869,594.63 | 3,087,058.84 | 3,721,832.30 | 64,234,821.17 |
| Total | 916,215,448.24 | 3,087,058.84 | 3,721,832.30 | 915,580,674.78 |
The reduction of capital reserve is the acquisition of minority shareholders’ equity by the Company’spremium, and the premium partially offsets the capital reserve. For details, please refer to “Note IX.Interests in other entities, (2) Changes in the share of owners’ equity in subsidiaries and control oftransactions of subsidiaries, 2. Transactions on minority shareholders and ownership of owners’ equityimpact”.
(54) Treasury Stock
Not applicable
(55) Other Comprehensive Income
| Item | Beginning Balance | Change in Current Period | Ending Balance | |||||
| Accrual before Income tax for the Current Period | Less: recognized as other comprehensive income for previous years and transferred in the profit or loss for the current year | Less: Income Tax Expenses | Attributable to Owners of the Parent Company | Attributable to Minority Shareholders | Accrual before Income tax for the Current Period | |||
| 1. Other comprehensive income that cannot be reclassified in the loss and gain in the future | 15,653,812.22 | 2,594,583.52 | 2,594,583.52 | 18,248,395.74 | ||||
| Including: change in re-measurement of the net liabilities and net | -43,683,128.99 | -43,683,128.99 | ||||||
| Item | Beginning Balance | Change in Current Period | Ending Balance | |||||
| Accrual before Income tax for the Current Period | Less: recognized as other comprehensive income for previous years and transferred in the profit or loss for the current year | Less: Income Tax Expenses | Attributable to Owners of the Parent Company | Attributable to Minority Shareholders | Accrual before Income tax for the Current Period | |||
| assets under defined benefit plan | ||||||||
| A share in other comprehensive income of investee that cannot be reclassified in the losses and gains under the equity method | ||||||||
| Changes in fair value of other equity instruments investment | 59,336,941.21 | 2,594,583.52 | 2,594,583.52 | 61,931,524.73 | ||||
| Changes in the fair value of the company's own credit risk | ||||||||
| 2. Other comprehensive income that will be reclassified in the loss and gain in the future | -44,414,521.22 | -8,975,300.30 | -8,975,300.30 | -53,389,821.52 | ||||
| Including: a share in other comprehensive income of investee that will be reclassified in the loss and gain under the equity method | ||||||||
| Losses and gains on the change in fair value of available-for-sale financial assets | ||||||||
| Held-to-maturity investments reclassified as losses and gains on available-for-sale financial assets | ||||||||
| Effective portion of losses and gains on cash flow hedges | ||||||||
| Foreign currency translation differences | ||||||||
| Total other comprehensive income | -44,414,521.22 | -8,975,300.30 | -8,975,300.30 | -53,389,821.52 | ||||
| 2. Other comprehensive income that will be reclassified in the loss and gain in the future | -28,760,709.00 | -6,380,716.78 | -6,380,716.78 | -35,141,425.78 | ||||
(56) Special Reserve
Not applicable.
(57) Surplus Reserves
| Item | Beginning Balance | Increase in current period | Decrease in current period | Ending Balance |
| Statutory surplus reserves | 2,273,121.26 | 2,273,121.26 | ||
| Discretionary surplus reserves | 2,273,121.26 | 2,273,121.26 | ||
| Total | 4,546,242.52 | 4,546,242.52 |
(58) Undistributed Profits
| Item | Reporting period | Same period of the previous year |
| Adjustments to undistributed profits as at December 31, 2018 | 819,208,053.71 | 692,241,691.51 |
| Adjustments to total undistributed profits as at January 1, 2019 (“+” for increase, “-“ for decrease) | 11,741,623.31 | |
| Adjusted undistributed profits as at January 1, 2018 | 830,949,677.02 | 692,241,691.51 |
| Plus: net profit attributable to owners of the parent company for current period | 70,652,950.10 | 100,161,346.50 |
| Less: withdrawal of statutory surplus reserves | ||
| Withdrawal of discretionary surplus reserves | ||
| Withdrawal of general risk reserves | ||
| Ordinary share dividends payable | ||
| Ordinary share dividend transferred to share capital (paid-in capital) | ||
| Undistributed profits as at June 30, 2019 | 901,602,627.12 | 792,403,038.01 |
Due to the retrospective adjustment of the “Accounting Standards for Business Enterprises” and its relatednew regulations, the undistributed profit at the beginning of the period was affected by RMB11,741,623.31.
(59) Operating income and operating costs
| Item | Six months ended June 30, 2019 | Six months ended June 30, 2018 | ||
| Income | Cost | Income | Cost | |
| Main business | 1,577,978,013.07 | 1,174,976,738.90 | 1,449,212,806.09 | 1,029,214,894.79 |
| Other businesses | 44,005,016.73 | 24,003,799.32 | 45,581,607.18 | 23,236,130.67 |
| Total | 1,621,983,029.80 | 1,198,980,538.22 | 1,494,794,413.27 | 1,052,451,025.46 |
(60) Taxes and surcharges
| Item | Six months ended June 30, 2019 | Six months ended June 30, 2018 |
| Urban maintenance and construction tax | 1,186,567.54 | 806,953.97 |
| Educational surtax | 831,796.89 | 718,049.63 |
| Property tax | 2,701,640.87 | 2,215,365.99 |
| Land use tax | 843,976.91 | 958,617.88 |
| Vehicle and vessel tax | 24,563.19 | 16,544.80 |
| Stamp tax | 468,024.50 | 444,355.20 |
| Other | 241,643.00 | 344.20 |
| Total | 6,298,212.90 | 5,160,231.67 |
(61) Selling Expenses
| Item | Six months ended June 30, 2019 | Six months ended June 30, 2018 |
| Employee compensation | 81,976,322.24 | 68,477,738.65 |
| Fix and after-sale service charges | 12,435,841.37 | 11,855,231.61 |
| Office expenses | 567,519.91 | 411,478.32 |
| Travelling expenses | 12,093,308.16 | 9,834,477.29 |
| Transportation cost | 15,652,097.07 | 12,094,658.88 |
| Advertising expense | 5,003,069.64 | 2,394,034.63 |
| Commission | 11,052,766.29 | 11,350,261.62 |
| Leasing and storage charges | 6,533,043.72 | 3,982,825.41 |
| Insurance premium | 929,634.60 | 328,652.94 |
| Conference fees | 217,143.44 | 118,897.55 |
| Depreciation costs | 1,509,570.82 | 1,211,664.30 |
| Exhibition fees | 2,440,143.71 | 1,585,467.46 |
| Sample printed matter and product loss | 6,053,510.87 | 5,905,187.62 |
| Entertainment expenses | 2,302,784.51 | 757,129.82 |
| Other | 17,395,172.74 | 17,292,848.42 |
| Total | 176,161,929.09 | 147,600,554.52 |
(62) General and Administrative Expenses
| Item | Six months ended June 30, 2019 | Six months ended June 30, 2018 |
| Employee compensation | 75,969,230.38 | 69,551,075.61 |
| Office expenses | 2,840,052.69 | 1,947,623.71 |
| Water and electricity | 1,155,128.33 | 571,118.40 |
| Entertainment expenses | 3,386,709.26 | 3,324,228.18 |
| Property insurance premium | 1,153,967.13 | 1,172,655.05 |
| Conference fees | 41,789.39 | 130,873.98 |
| Travelling expenses | 4,622,465.02 | 3,880,277.57 |
| Depreciation costs | 9,360,965.39 | 5,137,472.71 |
| Repair charges | 361,168.64 | 242,365.23 |
| Transportation cost | 958,392.82 | 776,519.62 |
| Rental fees | 7,205,143.75 | 5,210,376.21 |
| Costs of board meetings and supervisors’ meetings | 234,043.92 | 251,601.17 |
| Agency fees and advisory expenses | 7,281,420.10 | 10,898,525.41 |
| Litigation cost | 810,295.19 | 485,226.44 |
| Other | 5,750,684.99 | 4,538,832.58 |
| Total | 121,131,457.00 | 108,118,771.87 |
(63) R &D Expenses
| Item | Six months ended June 30, 2019 | Six months ended June 30, 2018 |
| Employee compensation | 38,830,582.16 | 30,214,516.84 |
| Material consumption | 8,956,173.83 | 13,545,488.72 |
| Depreciation and amortization expenses | 1,278,345.03 | 1,364,889.62 |
| Others | 1,299,664.93 | 1,312,909.36 |
| Total | 50,364,765.95 | 46,437,804.54 |
(64) Financial Expenses
| Item | Six months ended June 30, 2019 | Six months ended June 30, 2018 |
| Interest expenses | 10,871,565.30 | 6,107,454.56 |
| Less: Interest income | -1,968,344.40 | -2,498,914.91 |
| Gains and losses on exchange | 414,403.26 | 7,052,428.53 |
| Others | -442,588.49 | 1,430,263.38 |
| Total | 8,875,035.67 | 12,091,231.56 |
(65) Other Income
| Item | Six months ended June 30, 2019 | Six months ended June 30, 2018 |
| Financial support fund | 5,315,320.00 | 466,000.00 |
| Unemployment insurance aids enterprises to stabilize subsidies | 1,229,254.26 | 46,700.00 |
| Innovation Drives Industry Transformation and Upgrade Assessment Award | 80,000.00 | |
| Property tax return | 717,178.80 | |
| Qiantang Economic Development Zone subsidy | 1,470,000.00 | 1,250,000.00 |
| Comprehensive Bonded Area Management Committee Subsidy | 44,000.00 | |
| VAT refund | 1,047,416.87 | |
| Others | 319,838.64 | 12,494.76 |
| Total | 9,381,829.77 | 2,616,373.56 |
(66) Investment Income
| Item | Six months ended June 30, 2019 | Six months ended June 30, 2018 |
| Long-term equity investments measured under equity method | -1,691,101.14 | |
| Investment income from disposal of long-term equity investment | 22,150,051.44 | |
| Investment income of a financial asset at its fair value and whose changes are included in the current profits and losses during the period of holding | ||
| Investment income obtained from the disposal of financial assets at fair value and their changes are included in the current profits and losses | 26,338.67 | |
| Investment income of the held-to-maturity investment during the holding period | ||
| Investment income obtained from the disposal of the held-to-maturity investment | ||
| Investment income derived from available-for-sale financial assets | 11,889,784.50 |
| Item | Six months ended June 30, 2019 | Six months ended June 30, 2018 |
| Investment income from disposal of available-for-sale financial assets | ||
| Investment income of transactional financial assets during the holding period | 1,555,711.20 | |
| Dividend income from other equity instruments invested during the holding period | 900,000.00 | |
| Interest income earned by the debt investment during the holding period | ||
| Interest income earned by other debt investments during the holding period | ||
| Investment income from disposal of transactional financial assets | 59,257.62 | |
| Investment income from disposal of other equity instruments | ||
| Investment income from disposal of debt investment | ||
| Investment income from disposal of other debt investments | ||
| Others | 2,162,180.12 | 7,260,044.29 |
| Total | 26,827,200.38 | 17,485,066.32 |
(67) Net Hedge Income
Not applicable.
(68) Gains from Changes in Fair Value
| Item | Six months ended June 30, 2019 | Six months ended June 30, 2018 |
| Transactional financial assets | 4,441,599.00 | |
| Among them: the gains from changes in fair value arising from derivative financial instruments | ||
| Transactional financial liabilities | ||
| Investment property measured at the fair value | ||
| Total | 4,441,599.00 |
(69) Credit Impairment Loss
| Item | Six months ended June 30, 2019 | Six months ended June 30, 2018 |
| Bad debt loss of accounts receivable | -4,856,413.95 | |
| Bad debt loss of other receivables | -244,746.05 | |
| Total | -5,101,160.00 |
(70) Losses from Asset Impairment
| Item | Six months ended June 30, 2019 | Six months ended June 30, 2018 |
| Losses from bad debts | 409,326.21 | |
| Losses from inventory impairment | -923,010.98 | -58,842.08 |
| Total | -923,010.98 | 350,484.13 |
(71) Gain on Disposal of Assets
| Item | Six months ended June 30, 2019 | Six months ended June 30, 2018 |
| Fixed assets | -54,610.64 | -571,141.92 |
| Total | -54,610.64 | -571,141.92 |
(72) Non-operating Income
| Item | Six months ended June 30, 2019 | Six months ended June 30, 2018 | Amount included in current non-recurring gains and losses |
| Government grants | 20,000.00 | ||
| Unpayable payables | 843,369.30 | 398,451.43 | 843,369.30 |
| Others | 581,839.90 | 2,937,503.29 | 581,839.90 |
| Total | 1,425,209.20 | 3,355,954.72 | 1,425,209.20 |
(73) Non-operating Expenses
| Item | Six months ended June 30, 2019 | Six months ended June 30, 2018 | Amount included in current non-recurring gains and losses |
| Donations made | 252,000.00 | 651,000.00 | 252,000.00 |
| Amercement and overdue fine outlay | 27,430.04 | 217,621.81 | 27,430.04 |
| Compensation expense | 30,000.00 | 30,000.00 | |
| Others | 79,386.93 | 86,951.12 | 79,386.93 |
| Total | 388,816.97 | 955,572.93 | 388,816.97 |
(74) Income Tax Expenses
| Item | Six months ended June 30, 2019 | Six months ended June 30, 2018 |
| Current income tax expenses | 17,757,193.25 | 31,390,146.67 |
| Deferred income tax expenses | 1,943,588.88 | 1,539,881.68 |
| Total | 19,700,782.13 | 32,930,028.35 |
(75) Other Comprehensive Income
See notes for details.
(76) Items of the Statement of Cash Flows
A. Cash received from other operating activities
| Item | Six months ended June 30, 2019 | Six months ended June 30, 2018 |
| Current accounts and advances withdrawn | 21,833,449.53 | 14,390,620.52 |
| Special subsidies and grants | 6,681,929.77 | 2,636,373.56 |
| Interest income | 1,726,397.38 | 1,914,330.36 |
| Non-operating income: | 581,839.90 | 49,158.26 |
| Other | 427,686.78 | 1,034,817.18 |
| Total | 31,251,303.36 | 20,025,299.88 |
B. Cash paid for other operating activities
| Item | Six months ended June 30, 2019 | Six months ended June 30, 2018 |
| Current accounts paid | 25,946,613.12 | 30,750,544.80 |
| Selling expenses | 72,391,539.34 | 50,045,373.71 |
| General and administrative expenses | 43,989,692.37 | 56,975,876.20 |
| Non-operating expenses | 930,891.31 | 766,673.43 |
| Others | 6,198,971.78 | 6,317,754.30 |
| Total | 149,457,707.92 | 144,856,222.44 |
C. Cash received from other investing activitiesNot applicable.
D. Cash paid from other investing activitiesNot applicable.
E. Cash received from other financing activitiesNot applicable.
F. Cash paid from other financing activities
| Item | Six months ended June 30, 2019 | Six months ended June 30, 2018 |
| Cash paid for finance lease | 1,906,007.70 | |
| Returning the borrowings from original shareholders of Richpeace | 19,600,000.00 | |
| Total | 21,506,007.70 |
(77) Supplementary Information on the Statement of Cash Flows
A. Supplementary Information on the Statement of Cash Flows
| Item | Six months ended June 30, 2019 | Six months ended June 30, 2018 |
| 1. Net profit adjusted to cash flows from operating activities | ||
| Net profit | 76,078,548.60 | 112,285,929.18 |
| Plus: Provision for assets impairment | 6,024,170.98 | -350,484.13 |
| Depreciation of fixed assets and others | 30,307,817.49 | 25,407,641.27 |
| Amortization of intangible assets | 16,258,093.65 | 11,134,050.39 |
| Amortization of long-term deferred expenses | 441,944.07 | 186,385.50 |
| Losses on disposal of fixed assets, intangible assets and other long-term assets (“-“ for gains) | -54,610.64 | 571,141.92 |
| Item | Six months ended June 30, 2019 | Six months ended June 30, 2018 |
| Losses on write-off of fixed assets （“-” for gains） | 18,459.12 | |
| Losses from changes in fair value (“-“ for gains) | -4,441,599.00 | |
| Financial expenses (“-” for income) | 12,135,331.99 | 13,159,883.09 |
| Investments losses (“-“ for gains) | -26,827,200.38 | -17,485,066.32 |
| Decreases in the deferred income tax assets (“-” for increases) | -3,587,049.18 | -2,942,077.58 |
| Increases in the deferred income tax liabilities (“-” for decreases) | 6,004,657.04 | 1,935,513.24 |
| Decreases in inventories (“-” for increases) | -76,408,921.65 | -82,640,544.93 |
| Decreases in operating payables (“-” for increases) | -79,261,919.75 | -105,872,538.02 |
| Increases in operating payables (“-” for decreases) | -63,698,713.53 | -13,092,988.36 |
| Others | ||
| Net cash flows from operating activities | -107,010,991.19 | -57,703,154.75 |
| 2. Significant investment and financing activities involving no cash receipts and payments | ||
| Conversion of debt into capital | ||
| Convertible corporate bonds maturing within one year | ||
| Fixed assets acquired under financial lease | ||
| 3. Net change in cash and cash equivalents: | ||
| Ending balance of cash | 691,976,011.10 | 625,219,186.80 |
| Less: beginning balance of cash | 558,241,622.39 | 713,813,720.45 |
| Plus: ending balance of cash equivalents | ||
| Less: beginning balance of cash equivalents | ||
| Net increase in cash and cash equivalents | 133,734,388.71 | -88,594,533.65 |
B. Net cash paid to acquire subsidiaries during the current periodNot applicable.
C. Net cash received from disposal of subsidiaries during the current periodNot applicable.
D. Composition of cash and cash equivalents
| Item | Ending Balance | Beginning Balance |
| 1. Cash | 691,976,011.10 | 558,241,622.39 |
| Including: cash on hand | 697,634.16 | 743,089.39 |
| Unrestricted bank deposit | 687,708,199.44 | 556,269,113.49 |
| Other unrestricted monetary funds | 3,570,177.50 | 1,229,419.51 |
| Deposit in central bank available for payment | ||
| Deposits with banks and other financial institutions | ||
| Loans from banks and other financial institutions | ||
| 2. Cash equivalents | ||
| Including: bond investments maturing within three months | ||
| 3. Ending Balance of cash and cash equivalents | 691,976,011.10 | 558,241,622.39 |
| Including: cash and cash equivalents restricted for use by the parent company or subsidiaries within the group |
(78) Notes of items in Statement of Changes in Owner’s Equity
Not applicable.
(79) Assets with restricted ownership or use rights
| Item | Book value at the end of period | Restricted reasons |
| Monetary funds | 33,178,269.74 | Various types of deposits and other restricted funds |
| Notes receivable | 1,639,448.00 | Bill pledge business |
| Fixed assets | 6,194,658.62 | Bank loan is mortgaged |
| Item | Book value at the end of period | Restricted reasons |
| Intangible assets | 14,694,873.26 | Bank loan is mortgaged |
| Construction in progress | 59,113,440.42 | Bank loan is mortgaged |
| Investment property | 26,186,673.19 | Financing guarantee |
| Total | 141,007,363.23 |
(80) Monetary items in foreign currency
A. Monetary items in foreign currency
| Item | Ending balance of foreign currency | Exchange rate | Ending balance of conversion into RMB |
| Monetary funds | 42,617,439.55 | ||
| Including: USD | 5,651,499.23 | 6.8632 | 38,787,369.50 |
| EUR | 488,074.89 | 7,8473 | 3,830,070.05 |
B. Description of overseas operating entitiesThe domicile of primary operation of the Company’s subsidiary, DA AG, is in Germany, with Euro asfunctional currency for it is the applicable currency for the operation region.
The domicile of primary operation of the Company’s subsidiary, DAP Vietnam Co., Ltd., is in Vietnam,with VND as functional currency for it is the applicable currency for the operation region.
(81) Hedging
Not applicable.
(82) Government Grants
| Type | Amount | Item | Amount recognized in current profits and losses |
| Financial support funds | 5,315,320.00 | Other income | 5,315,320.00 |
| Unemployment insurance aids enterprises to stabilize subsidies | 1,229,254.26 | Other income | 1,229,254.26 |
| Qiantang Economic Development Zone subsidy | 1,470,000.00 | Other income | 1,470,000.00 |
| VAT refund | 1,047,416.87 | Other income | 1,047,416.87 |
| Other | 319,838.64 | Other income | 319,838.64 |
| Total | 9,381,829.77 | 9,381,829.77 |
8. Change in the Scope of Consolidation
(1) Business combinations not under common control
Not applicable.
(2) Business combinations under common control
Not applicable.
(3) Reverse purchase
Not applicable.
(4) Disposal of subsidiaries
Not applicable.
(5) Changes in consolidation scope with other reasons
Not applicable.
9. Equity in Other Entities
(1) Equity in subsidiaries
A. Composition of enterprise groups
| Name of Subsidiary | Major Places of Business | Registered Place | Business Nature | Shareholding Ratio (%) | Acquisition method | |
| Direct | Indirect | |||||
| Shanghai Shanggong Butterfly Sewing Machine Co., Ltd. | Shanghai, China | Shanghai, China | Production and sales of sewing machines | 100.00 | Investment | |
| DAP (Shanghai) Co., Ltd. | Shanghai, China | Shanghai, China | Sales of sewing machines | 100.00 | Investment | |
| Shanghai SMPIC Imp. & Exp. Co., Ltd. | Shanghai, China | Shanghai, China | Sales, import and export of office equipment | 100.00 | Investment | |
| Shanghai SGSB Electronics Co., Ltd. | Shanghai, China | Shanghai, China | Production and sales of electronic equipment | 100.00 | Investment | |
| Shanghai SGSB Asset Management Co., Ltd. | Shanghai, China | Shanghai, China | Asset and property management | 100.00 | Investment | |
| Shanghai Fengjian Property Co., Ltd. | Shanghai, China | Shanghai, China | Property Management | 100.00 | Business combinations under common control | |
| Duerkopp Adler AG | Bielefeld, Germany | Bielefeld, Germany | Production and sales of sewing machines | 100.00 | Investment | |
| Zhejiang ShangGong GEMSY CO., LTD. | Taizhou, Zhejiang, China | Taizhou, Zhejiang, China | Production and sales of sewing machines | 60.00 | Investment | |
| Shanghai Shensy Enterprise Development Co., Ltd. | Shanghai, China | Shanghai, China | Logistics, etc. | 50.00 | The Company purchased 9.97% equitp of SHENSY from Shanghai Pudong Emerging Industry Investment Co., Ltd. in the report period. The shareholding ratio increased from 40.03% to 50%. | |
| Shanghai ShangGong Financial Leasing Co., Ltd. | Shanghai, China | Shanghai, China | Financial Leasing | 51.00 | 49.00 | Investment |
| PFAFF Industrial Sewing Machine (Zhangjiagang) Co., Ltd. | Zhangjiagang, Jiangsu, China | Zhangjiagang, Jiangsu, China | Production and sales of sewing machines | 30.25 | 69.75 | The company directly holds 30.25% of the shares of PFAFF Sewing Machine (Zhangjiagang) Co., Ltd., and indirectly holds the remaining 69.75% equity through other subsidiaries. Since the company directly manages the business activities of PFAFF Industrial Sewing Machine (Zhangjiagang) Co., Ltd., this company is included in the direct scope of the company. |
| DAP Vietnam Co., Ltd. | Ho Chi Minh, Vietnam | Ho Chi Minh, Vietnam | Sales of sewing machines | 100.00 | Investment | |
| ShangGong Sewing Equipment (Zhejiang) Co., Ltd. | Taizhou, Zhejiang, China | Taizhou, Zhejiang, China | Production and sales of sewing machines | 100.00 | Investment | |
| Dürkopp Adler Industrial Manufacturing (Shanghai) Co., Ltd. | Shanghai, China | Shanghai, China | Production and sales of sewing machines | 51.00 | 49.00 | Investment |
| TIANJIN RICHPEACE AI CO., LIMITED | Tianjing, China | Tianjing, China | Production and sales of sewing and intelligent equipment | 65.00 | Business combinations not under common control | |
B. Important non-wholly owned subsidiary
| Name of subsidiary | Minority shareholders Shareholding% | Profit and loss attributable to minority shareholders for the current period | Other comprehensive income attributable to minority shareholders in this period | Balance of minority shareholders' equity at the end of the period |
| Zhejiang ShangGong GEMSY CO., LTD. | 40.00 | -997,053.67 | 84,652,974.20 | |
| Shanghai Shensy Enterprise Development Co., Ltd. | 50.00 | 2,571,143.63 | 132,413,716.66 | |
| TIANJIN RICHPEACE AI CO., LIMITED | 35.00 | 2,511,197.49 | 50,755,036.44 |
C. Main financial data of important non-wholly owned subsidiary
| Name of subsidiary | Ending Balance | Beginning Balance | ||||||||||
| Current assets | Non-current assets | Total assets | Current liabilities | Non-current liabilities | Total liabilities | Current assets | Non-current assets | Total assets | Current liabilities | Non-current liabilities | Total liabilities | |
| Zhejiang ShangGong GEMSY CO., LTD. | 267,571,128.64 | 96,672,973.89 | 364,244,102.53 | 152,611,667.03 | 152,611,667.03 | 262,049,874.07 | 98,559,165.52 | 360,609,039.59 | 146,483,969.92 | 146,483,969.92 | ||
| Shanghai Shensy Enterprise Development Co., Ltd. | 399,712,888.99 | 98,078,143.53 | 497,791,032.52 | 212,463,094.72 | 20,118,632.86 | 232,581,727.58 | 382,809,588.75 | 93,768,523.55 | 476,578,112.30 | 213,777,562.28 | 1,878,628.16 | 215,656,190.44 |
| TIANJIN RICHPEACE AI CO., LIMITED | 172,235,395.06 | 58,342,337.57 | 230,577,732.63 | 140,605,600.57 | 140,605,600.57 | 154,392,606.55 | 57,857,955.80 | 212,250,562.35 | 161,027,646.24 | 1,608,000.62 | 162,635,646.86 | |
| Name of subsidiary | Six months ended June 30, 2018 | Six months ended June 30, 2018 | ||||||
| Operating income | Net profit | Total comprehensive income | Cash flow from operating activities | Operating income | Net profit | Total comprehensive income | Cash flow from operating activities | |
| Zhejiang ShangGong GEMSY CO., LTD. | 166,160,497.18 | -2,492,634.17 | -2,492,634.17 | 3,360,636.84 | 162,005,039.06 | -1,470,384.24 | -1,470,384.24 | 4,900,293.65 |
| Shanghai Shensy Enterprise Development Co., Ltd. | 464,735,166.06 | 4,287,383.08 | 4,287,383.08 | -1,304,985.39 | 362,468,133.25 | 9,786,092.92 | 9,786,092.92 | -28,060,959.13 |
| TIANJIN RICHPEACE AI CO., LIMITED | 92,534,369.00 | 7,174,849.98 | 7,174,849.98 | -14,831,373.85 | ||||
Note: TIANJIN RICHPEACE AI CO., LIMITED was included in the scope of the consolidated statements of the Company since August 31, 2018.
D. Major restrictions on the use of group assets and liquidation of group debtNot applicable.
E. Financial support or other support provided to structured entities included in the scope of consolidated financial statementsNot applicable
(2) Transaction that changes the shareholding ratio in subsidiaries but still controls the subsidiariesA. DesciptionIn the current period, the Company purchased 9.97% equity in Shanghai Shensi Enterprise DevelopmentCo., Ltd. held by Shanghai Pudong Emerging Industry Investment Co., Ltd. through the delisting ofShanghai United Assets and Equity Exchange.
B. Impact of the transaction on minority shareholders' equity and Total owners' equity attributableto the parent company
| SHENSY | |
| Purchase cost/disposal consideration | |
| -- Cash | 30,163,200.00 |
| -- Fair value of non-cash assets | |
| Total purchase cost/disposal consideration | 30,163,200.00 |
| Less: Net assets of subsidiaries calculated according to the proportion of acquired/disposed equity | 26,441,367.70 |
| Difference | 3,721,832.30 |
| Among them: adjusting the capital reserve | 3,721,832.30 |
| Adjust surplus reserve | |
| Adjust undistributed profit |
(3) Equity in joint operation and joint venture
Not applicable.
(4) Important common management
Not applicable.
(5) Equity in structured entities not included in the scope of consolidated financial statementsNot applicable.
10. Risks Related to Financial Instruments
The Company faces various financial risks in the course of its operations: credit risk, market risk andliquidity risk. The Board of Directors of the Company is fully responsible for the determination of riskmanagement objectives and policies, and assumes ultimate responsibility for risk management objectivesand policies. The Board of Directors reviews the effectiveness of the implemented procedures and therationality of risk management objectives and policies through monthly reports submitted by the heads offunctional departments and subsidiaries. The Company's internal audit department will audit the riskmanagement policies and procedures and report the findings to the audit committee.The overall goal of the Company's risk management is to formulate a risk management policy thatminimizes risks without excessively affecting the Company's competitiveness and resilience.
10.1 Credit risk
Credit risk refers to the risk that one party to a financial instrument fails to perform its obligations andcauses financial losses to the other. The Company's credit risk is mainly related to accounts receivable.
(1) Accounts Receivable
The accounts receivable of the Company are mainly exposed to the credit risk of customers caused bycredit sales. Before opening up new customers and signing new framework contracts, the Company willevaluate new customers' credit risks, including external credit ratings and, in some cases, bank creditcertificates (when this information is available).
For the sewing machine business and export trading business, the Company sets a credit limit for eachcustomer, which is the maximum amount that does not require additional approval. For sales that exceedthe credit limit, the Company only sells it on the premise of additional approval. Otherwise, it must demand
that it pay the corresponding amount in advance. For customers who have not completed payment in atimely manner on the previous credit sale, the Company will no longer accept new product orders beforerecovering accounts receivable.
For the logistics business, the Company only deals with customers that have been approved and have agood reputation and have a certain scale. After the credit period expires, the Company will perform variousforms of collection for customers who have not paid on time. Due to the high dispersion of customers in thelogistics business, there is no significant concentration of credit risk.
As of the end of the report period, the top five customers' accounts receivable of the Companyaccounted for 13.54% of the ending balance, and the Company did not have significant credit risk.
(2) Other Receivables
The Company's other receivables mainly include export tax refund receivables, various types ofdeposits and deposits. The Company manages and monitors this type of payments together with relatedeconomic activities to ensure that the Company does not have significant bad debt risks.
10.2 Market risk
The market risk of financial instruments refers to the risk that the fair value or future cash flow offinancial instruments fluctuates due to changes in market prices, including exchange rate risk, interest raterisk and other price risks.
(1) Interest Rate Risk
Interest rate risk refers to the risk that the fair value or future cash flow of a financial instrument willfluctuate due to changes in market interest rates. The interest rate risk that the Company may face is mainlyderived from bank loans that carry interest at floating rates.
As of June 30, 2019, the Company’s short-term bank loans with Euribor as benchmark interest ratetotaled 1.365 million euros, and long-term loans with Euribor as benchmark interest rate totaled 43.198million euros. Supposing that other variables remain unchanged, a 50% benchmark change in interest rateswould have no significant impact on the Company's current profit or loss and shareholders' equity.
(2) Exchange Rate Risk
Exchange rate risk refers to the risk of loss due to exchange rate changes. The foreign exchange risk ofthe Company mainly includes the risk associated with the monetary assets and liabilities formed by theCompany and its subsidiaries and overseas customers through the settlement of non-standard currencies, aswell as the risk of translation differences in foreign currency statements. The former risk affects the currentperiod profit and loss, and the latter risk affects owner's equity (other comprehensive income).
See Note 5.(80) for details of monetary items in foreign currency as of June 30, 2019.
Exchange rate risk sensitivity analysis:
With the other variables unchanged, the pre-tax impact of reasonable changes in exchange rates on thecurrent profit or loss and owner's equity is as follows:
| Item | Exchange rate changes | Six months ended June 30, 2019 | Six months ended June 30, 2018 | ||
| Impact on current profits and losses | Impact on owner's equity | Impact on current profits and losses | Impact on owner's equity | ||
| Foreign currency statement conversion | 10% appreciation of RMB | 4,597,690.61 | 92,995,076.73 | 6,146,172.97 | 95,841,411.32 |
| Foreign currency statement conversion | 10% depreciation of RMB | -4,597,690.61 | -92,995,076.73 | -6,146,172.97 | -95,841,411.32 |
| Foreign Currency Items | 10% appreciation of RMB | 9,574,081.00 | 9,574,081.00 | 7,693,309.93 | 7,693,309.93 |
| Foreign Currency Items | 10% depreciation of RMB | -9,574,081.00 | -9,574,081.00 | -7,693,309.93 | -7,693,309.93 |
(3) Other Price Risks
The Company holds equity investments in other listed companies. The management of the Companybelieves that the market price risks faced by these investment activities are acceptable. The listedcompany’s equity investment held by the Company is listed as follows:
| Item | Ending Balance | Beginning Balance |
| Transactional financial assets | 90,854,497.33 | 86,406,778.33 |
| Total | 90,854,497.33 | 86,406,778.33 |
As of June 30, 2019, if all other variables remain unchanged, if the value of the equity instrumentincreases or decreases by 20%, the Company will increase or decrease the Fair value change income by18,170,899.47 yuan. The management of the Company believes that 20% reasonably reflects the reasonablerange of possible changes in the value of equity instruments in the next year.
10.3 Liquidity risk
Liquidity risk refers to the risk of shortage of funds when performing obligations settled by way ofdelivery of cash or other financial assets. The Company's policy is to ensure that it has sufficient cash torepay the debts due. Liquidity risk is centrally controlled by the Company's financial department. Bymonitoring cash balances, marketable securities that can be realised at any time, and rolling forecasts ofcash flows for the next 12 months, the financial department ensures that the Company has sufficient fundsto repay debts under all reasonably foreseen circumstances.
The Company's external sources of funds mainly include bank loans. As of June 30, 2019, theCompany's unused bank loan quota was 14 million euros (is equivalent to 110 million yuan at the end ofthe period) and 630 million yuan. The Company's own funds are relatively abundant and liquidity risk isrelatively small.
11. Disclose of Fair Value
(1) The fair value at end of current period of assets and liabilities measured at fair value
| Item | Fair value at the end of reporting period | |||
| Measured at the fair value of the first level | Measured at the fair value of the second level | Measured at the fair value of the third level | Total | |
| 1. Measurement at fair value based on going concern | ||||
| (1) Transactional financial assets | 90,854,497.33 | 90,854,497.33 | ||
| A. Financial assets measured at fair value through current profit and loss | 90,854,497.33 | 90,854,497.33 | ||
| a. Investment in debt instruments | ||||
| b. Investments in equity instruments | 90,854,497.33 | 90,854,497.33 | ||
| c. Derivative financial assets | ||||
| B. Financial assets designated to be measured at fair value through current profit and loss | ||||
| a. Investment in debt instruments | ||||
| b. investments in equity instruments | ||||
| (2) Other debt investment | ||||
| (3) Other equity investment | 91,079,774.22 | 91,079,774.22 | ||
| (4) Investment property | ||||
| A. Use right of leased land | ||||
| B. Leased buildings | ||||
| C. Land use right held for transfer upon appreciation | ||||
| (5) Biological assets | ||||
| A. Consumable biological assets | ||||
| B. Productive biological assets | ||||
| Total amount of assets measured at fair value based on going concern | 90,854,497.33 | 91,079,774.22 | 181,934,271.55 | |
| (6) Transactional financialliabilities | ||||
| A. Financial liabilities measured at fair value through current profit and loss | ||||
| Including: issued bonds held for trading | ||||
| Derivative financial liabilities | ||||
| Others | ||||
| Item | Fair value at the end of reporting period | |||
| Measured at the fair value of the first level | Measured at the fair value of the second level | Measured at the fair value of the third level | Total | |
| B. Financial liabilities designated to be measured at fair value through current profit and loss | ||||
| Total amount of liabilities measured at fair value based on going concern | ||||
| 2. Measurement at fair value based on going concern | ||||
| (1) Assets held for sale | ||||
| Total amount of assets measured at fair value not based on going concern | ||||
| Total amount of liabilities measured at fair value not based on going concern | ||||
The input values used for fair value measurement are divided into three levels:
The first level of input is an unadjusted quote for the same asset or liability that can be obtained on themeasurement date in an active market.The second level input value is an input value that is directly or indirectly observable for related assetsor liabilities other than the first level input value.The third level input value is the unobservable input value of the relevant asset or liability.The level to which the fair value measurement result belongs is determined by the lowest level to which theinput value of the fair value measurement is significant.
(2) Basis for determination of market price for measurement of fair value of the first level based on
going concern and not based on going concern
The fair value at end of reporting period of Transactional financial assets was determined on the basisof the closing price of Shenzhen Stock Exchange and Shanghai Stock Exchange on the last trading day inJune 2019.
(3) Qualitative and quantitative information on valuation techniques and important parameters
used in item Measured at the fair value of the second level based on going concern and not based
on going concern
Not applicable.
(4) Qualitative and quantitative information on valuation techniques and important parameters
used in item Measured at the fair value of the second level based on going concern and not based
on going concern
Other equity instrument investments (non-listed company equity instrument investments) are equityinvestments that do not constitute control, joint control, significant influence, and no active marketquotation. The fair value at the end of the period is determined in accordance with reasonable methodsstipulated in accounting standards.
12. Related Party and Related Party Transaction
(1) The parent company of the Company
The Company is a listed company with no controlling shareholder and no actual controller.
(2) The subsidiaries of the Company
See the Note 9 Equity in Other Entities for the details.
(3) The joint operation and joint ventures of the Company
See the Note 9 Equity in Other Entities for the details.
(4) Other related parties
| Name of Other Related Parties | Relationship with the Company |
| Shanghai Hirose Precision Industrial Co., Ltd. | Other related party |
| Shanghai Fuji Xerox Co., Ltd. | Other related party |
| Zhejiang GEMSY Electromechanical Co., Ltd. | Other related party |
| Shenzhen Yingning Venture Capital Co., Ltd. | Other related party |
| Tianjin Tongshang Software Co., Ltd. | Other related party |
(5) Related transactions
A. Related transactions for purchase and sale of goods, receiving and rendering of servicesPurchase of goods / receipt of services
| Related Party | Content of Related Transaction | Six months ended June 30, 2019 | Six months ended June 30, 2018 |
| Stoll Electronics Co., Ltd. | Purchase of goods / Receiving of service | 10,978,177.50 |
Sales of goods /rendering of services
| Related Party | Content of Related Transaction | Six months ended June 30, 2019 | Six months ended June 30, 2018 |
| Shanghai Fuji Xerox Co., Ltd. | Sales of goods | 5,183,629.38 | 9,806,140.15 |
| Stoll Electronics Co., Ltd. | Sales of goods | 454,513.14 |
B. Related leaseThe Company acted as lessor:
| Name of leasee | Type of leased asset | Rental recognized in report period | Rental recognized in last period |
| Shanghai Hirose Precision Industrial Co., Ltd. | Machinery equipment | 250,000.00 | 250,000.00 |
(6) Receivables and payables from related parties
A. Receivables
| Item | Related party | Ending Balance | Beginning Balance | ||
| Book balance | Provision for bad debts | Book balance | Provision for bad debts | ||
| Accounts receivable | |||||
| Shanghai Fuji Xerox Co., Ltd. | 866,910.69 | 44,345.53 | 1,688,554.30 | 84,427.72 | |
| Stoll Electronics Co., Ltd. | 57,950.27 | ||||
| Prepayment | |||||
| Zhejiang Gemsy Mechanical and Electrical Co., Ltd. | 6,147,650.83 | 6,147,650.83 | |||
| Other receivables | |||||
| Zhejiang Gemsy Mechanical and Electrical Co., Ltd. | 697,279.69 | 469,379.69 | 697,279.69 | 367,679.69 | |
B. Payables
| Item | Related party | Ending Balance | Beginning Balance |
| Account payables | |||
| Stoll Electronics Co., Ltd. | 1,696,195.46 | ||
| Other payables | |||
| Shenzhen Yingning Venture Capital Co., Ltd. | 10,000,000.00 | 35,116,900.00 | |
| Tianjin Tongshang Software Co., Ltd. | 3,000,000.00 | 24,810,600.00 | |
| H. Stoll AG & Co. KG | 23,675,820.92 |
13. Share Payment
Not applicable.
14. Commitments and contingencies
(1) Important commitments
Not applicable.
(2) Contingencies
A. Important contingent events at the balance sheet datea) Contingent liabilities formed by debt guarantees provided by the Company for its subsidiary DAAG as of June 30, 2019
| Guarantee | Guarantee Amount | Commencement Date of Guarantee | Expiration Date of Guarantee | Whether the Guarantee has been Fulfilled or not | Note |
| Industrial and Commercial bank Shanghai Hongkou Branch | EUR 7.878 million | 21st December 2015 | 21st December 2020 | No | Note |
Note 5: on 21st December 2015, the Company's wholly owned subsidiary, DA AG (formerly knownas ShangGong Europe), applied to the Frankfurt Branch of ICBC for a loan of no more than 7.878 millioneuro so as to pay the acquisition fee to Stoll KG. ICBC Shanghai Hongkou Branch issued a financingguarantee letter for the funds, and the Company issued an unconditionally irrecoverable corporate letter ofguarantee for self-using fix assets where No.603 Dapu Road as counter guarantee for the abovementionedfinancing guarantee letter.As of June 30, 2019, there is no outflow of economic benefits arising from the above contingencies.
(2) Shanghai Shensy Enterprise Development Co., Ltd., a second-level subsidiary of the Company,borrowed 50,000,000.00 yuan from Bank of Communications Shanghai Baoshan Branch, borrowed RMB66,500,000.00 from China Construction Bank Shanghai Baosteel Baoshan Branch, and borrowed RMB10,000,000.00 from Shanghai Bank Fumin Branch. The third-level subsidiary Shanghai Shensy KaileInternet of Things Co., Ltd. provides joint liability guarantee.
As of June 30, 2019, there is no outflow of economic benefits arising from the above guarantee.
(3) The Company's third-level subsidiary Mudanjiang Kailehui Logistics Co., Ltd. signed a financingsale and leaseback contract with ProLogis Financial Leasing (Shanghai) Co., Ltd.. Shanghai ShensyEnterprise Development Co., Ltd., a second-level subsidiary of the Company, is jointly and severally liablefor all payment obligations under the financing sale and leaseback contract.
As of June 30, 2019, Shanghai Shensy Enterprise Development Co., Ltd. has not yet experienced theoutflow of economic benefits due to the above guarantees, and the amount of financing leases that have notyet been settled amounts to 117,403.04 yuan.
(4) Shanghai Shensy Kaile Supply Chain Management Co., Ltd., a third-level subsidiary of theCompany,borrowed RMB 18,267,733.00 yuan from China Construction Bank Shanghai Baosteel BaoshanBranch. Shanghai Shensy Enterprise Development Co., Ltd., a second-level subsidiary of the Company,provides joint liability guarantee.
As of June 30, 2019, there is no outflow of economic benefits arising from the above guarantee.
15. Post balance sheet event
(1) Important non-adjusting events
A. Capital increase in Shanghai ShangGong Financial Leasing Co., Ltd.
The Company and its subsidiary DA AG plans to jointly increase capital with Shanghai ZhongtongRuide Investment Group Co., Ltd. (hereinafter referred to as “ZTRD”). to Shanghai ShangGong FinancialLeasing Co., Ltd.; the Company will increase its capital by USD 2.10 million, DA AG will increase its
capital by USD 2.6 million, and ZTRD will increased its capital by USD 15.53 million. Upon completionof the capital increase, ZTRD will hold a 51.00% stake in Shanghai ShangGong Financial Leasing Co., Ltd.The Company will lose control of Shanghai ShangGong Financial Leasing Co., Ltd. and will no longerinclude Shanghai ShangGong Financial Leasing Co., Ltd. in the scope of consolidation of the Company. Asof the date of issuance of the financial statements, the capital increase has not yet completed the requiredgovernment filing or approval work and registration procedures, and the capital increase of eachshareholder has not been paid in place.
B. Equity incentive planThe Company plans to implement equity incentives to the company's directors, senior managementand other key personnel in business and management positions, in the form of stock options. At the time ofexercise, the Company will issue RMB A shares of common stock to the incentive object. The equityincentive plan is valid for five years. The exercise period is 36 months after the grant of equity, and thelock option period is 12 months after the stock option grant. The stock option is valid to meet theperformance requirements announced by the company. The equity incentive plan is to be awarded13,204,200.00 stock options, with a total of 318 employees granted for the first time, and the exercise priceis RMB 7.90 yuan/share.The equity incentive plan was approved by the 10th meeting of the 8th Board of Directors of theCompany on February 28, 2019, and was approved by the company's first extraordinary shareholdersmeeting in 2019 on March 18, 2019. As of the date of issuance of the financial statements, the equityincentive plan has not yet reached the exercise period.The equity incentive plan was approved by the 10th meeting of the 8th Board of Directors of theCompany on February 28, 2019, and was approved by the company's first extraordinary shareholdersmeeting in 2019 on March 18, 2019. As of the date of issuance of the financial statements, the equityincentive plan has not yet reached the exercise period.
(2) Profit Distribution
According to the resolution of the Company’s 11th Meeting of the 8th Board of Directors on 12 April2019, no dividends of 2018 will be distributed, neither the transferring of capital reserves into share capital.
16. Other Significant Events
(1) Division information
A. Basis for determining the report division
According to the Company's development strategy, four report divisions are identified according to thenature of the business: sewing equipment & intelligent equipment, logistics services, export trade and otherbusiness segments. Each of the Company's reporting segments offers different products and services.
B. Report division’s financial information
| Item | Sewing equipment division | Logistics service division | Export trade division | Other business segments | Offset between divisions | Total |
| 1. Operating income | 1,288,054,651.48 | 464,735,166.06 | 50,497,161.02 | 43,288,827.32 | 224,592,776.08 | 1,621,983,029.80 |
| Including: External transaction income | 1,068,553,062.47 | 464,735,166.06 | 50,497,161.02 | 38,197,640.25 | 1,621,983,029.80 | |
| Inter-segment transaction income | 219,501,589.01 | 5,091,187.07 | 224,592,776.08 | |||
| 2. Depreciation | 40,049,679.20 | 1,669,793.70 | 4,043.52 | 5,284,338.79 | 47,007,855.21 |
| Item | Sewing equipment division | Logistics service division | Export trade division | Other business segments | Offset between divisions | Total |
| and amortization | ||||||
| 3. Total profit | 113,487,277.47 | 5,401,363.07 | -209,978.64 | -9,058,428.95 | 13,840,902.22 | 95,779,330.73 |
| 4. Income tax expenses | 17,755,866.82 | 1,113,979.99 | 830,935.32 | 19,700,782.13 | ||
| 5. Net profit | 95,731,410.65 | 4,287,383.08 | -209,978.64 | -9,889,364.27 | 13,840,902.22 | 76,078,548.60 |
| 6. Total assets | 4,403,755,739.82 | 497,791,032.52 | 10,946,787.34 | 921,294,272.30 | 1,593,320,834.76 | 4,240,466,997.22 |
| 7. Total liabilities | 2,009,668,312.06 | 232,581,727.58 | 2,791,967.79 | 181,107,938.97 | 809,295,381.73 | 1,616,854,564.67 |
17. Notes to mains items of the financial statements of the parent company
(1) Accounts receivable
A. By aging
| Aging | Ending Balance |
| Within 1 year | 55,248,759.35 |
| 1 to 2 years | 1,221,212.97 |
| 2 to 3 years | 100,749.95 |
| Over 3 years | 64,671,383.02 |
| Total | 121,242,105.29 |
B. By bad debt provision method
| Type | Ending Balance | Beginning Balance | ||||||||
| Book balance | Provision for bad debts | Book value | Book balance | Provision for bad debts | Book value | |||||
| Amount | Proportion (%) | Amount | Proportion (%) | Amount | Proportion (%) | Amount | Proportion (%) | |||
| provision for bad debt made on an individual basis | 19,446,122.98 | 16.04 | 12,675,163.63 | 65.18 | 6,770,959.35 | 42,236,048.21 | 39.53 | 19,217,099.26 | 45.50 | 23,018,948.95 |
| provision for bad debt made on a portfolio with similar risk credit characteristics basis | 101,795,982.31 | 83.96 | 54,714,952.10 | 53.75 | 47,081,030.21 | 64,602,975.75 | 60.47 | 46,768,063.44 | 72.39 | 17,834,912.31 |
| Total | 121,242,105.29 | 100.00 | 67,390,115.73 | 55.58 | 53,851,989.56 | 106,839,023.96 | 100.00 | 65,985,162.70 | 61.76 | 40,853,861.26 |
Provision for bad debts made on an individual basis at the end of report period
| Name | Ending Balance | |||
| Accounts receivable | Provision for bad debts | Provision ratio (%) | Reason for provision | |
| Customer C | 6,745,451.61 | 337,272.58 | 5.00 | Estimated partially not recoverable |
| Customer D | 5,854,440.56 | 5,543,196.15 | 94.68 | Estimated partially not recoverable |
| Customer E | 4,679,327.49 | 4,679,327.49 | 100.00 | Estimated not recoverable |
| Other Customers | 2,166,903.32 | 2,115,367.41 | 99.11 | Estimated partially not recoverable |
| Total | 19,446,122.98 | 12,675,163.63 | 65.18 | / |
Accounts receivable with provision for bad debt made using the aging analysis method among theportfolios:
| Name | Ending Balance | ||
| Accounts receivable | Provision for bad debts | Provision ratio (%) | |
| Within 1 year | 48,477,800.00 | 2,424,115.14 | 5.00 |
| 1 to 2 years | 1,221,212.97 | 244,242.59 | 20.00 |
| 2 to 3 years | 100,749.95 | 50,374.98 | 50.00 |
| Over 3 years | 51,996,219.39 | 51,996,219.39 | 100.00 |
| Total | 101,795,982.31 | 54,714,952.10 | 53.75 |
C. Bad debt provision
| Type | Beginning Balance | Change | Ending Balance | ||
| Accure | Recover or reverse | Write off | |||
| Bad debt provision | 65,985,162.70 | 1,521,109.47 | 116,156.44 | 67,390,115.73 | |
| Total | 65,985,162.70 | 1,521,109.47 | 116,156.44 | 67,390,115.73 | |
D. Accounts receivable actually written off in current periodNot applicable.
E. Top five accounts receivable by the ending balance of the borrowers
| Company name | Ending Balance | ||
| Accounts receivable | Proportion in total accounts receivable (%) | Provision for bad debts | |
| Customer A | 11,530,775.39 | 9.51 | 11,530,775.39 |
| Customer B | 7,480,189.67 | 6.17 | 7,480,189.67 |
| Customer C | 6,745,451.61 | 5.56 | 337,272.58 |
| Customer D | 5,854,440.56 | 4.83 | 5,543,196.15 |
| Customer E | 4,679,327.49 | 3.86 | 4,679,327.49 |
| Total | 36,209,184.72 | 29.93 | 29,570,761.28 |
F. Receivables derecognized due to transfer of financial assetsNot applicable.
G. Transfer of accounts receivable and continued involvement in the formation of assets, liabilitiesNot applicable.
Note: For details of the arrears of related parties in the accounts receivable at the end of the period, pleaserefer to Note XII. (6) Accounts payable by related parties.
(2) Other Receivables
| Item | Ending Balance | Beginning Balance |
| Interest receivable | ||
| Dividends receivable | 1,050,356.92 | |
| Other receivables | 319,948,024.10 | 153,703,665.01 |
| Total | 319,948,024.10 | 154,754,021.93 |
Interest ReceivableNot applicable.
Dividends Receivable
| Investee | Ending Balance | Beginning Balance |
| Shanghai ShangGong Butterfly Sewin Machine Co., Ltd. | 1,050,356.92 | |
| Total | 1,050,356.92 |
Other ReceivablesA. By aging
| Aging | Ending Balance |
| Within 1 year | 381,003,939.72 |
| 1-2 years | 200,800.00 |
| 2-3 years | |
| Over 3 years | 29,177,304.03 |
| Total | 410,382,043.75 |
B. By nature
| Nature | Ending Balance | Beginning Balance |
| Employee Standby Fund and Employee Collection and Payment | 759,149.92 | 656,980.92 |
| Receivables from government agencies and institutions | 1,547,836.20 | |
| Deposit in security | 181,200.00 | |
| Current account | 409,622,893.83 | 234,173,241.93 |
| Total | 410,382,043.75 | 236,559,259.05 |
C. Provision for bad debts
| Provision for bad debts | The first stage | The second stage | The third stage | Total |
| Expected credit losses in the next 12 months | Expected credit loss for the entire duration (no credit impairment) | Expected credit loss for the entire duration (credit impairment has occurred) | ||
| Balance on January 1, 2019 | 53,638,130.01 | 40,160.00 | 29,177,304.03 | 82,855,594.04 |
| The balance of January 1, 2019 is in this period | ||||
| -- Transfer to the second stage | ||||
| -- Transfer to the third stage | ||||
| -- Turn back to the second stage | ||||
| -- Turn back to the first stage | ||||
| Accrue in report period | 7,655,613.88 | 7,655,613.88 | ||
| Recover in report period | 77,188.27 | 77,188.27 | ||
| Reverse in report period | ||||
| Write-off | ||||
| Other change | ||||
| Balance on June 30, 2019 | 61,216,555.62 | 40,160.00 | 29,177,304.03 | 90,434,019.65 |
D. Provision for bad debts
| Type | Begingning Balance | Change | Ending Balance | ||
| Accual | Reversal or recovery | Write-off | |||
| Other receivables bad debt provision | 82,855,594.04 | 7,655,613.88 | 77,188.27 | 90,434,019.65 | |
| Total | 82,855,594.04 | 7,655,613.88 | 77,188.27 | 90,434,019.65 | |
E. Other receivables actually write-off in the current periodNot applicable.
F. Top five other receivables in terms of their ending balance
| Name | Nature | Ending Balance | Age | % of Total other receivables | Ending Balance of Provision for Bad Debts |
| Customer A | Related party transactions | 88,590,200.00 | 1-2 years | 21.59 | 4,429,510.00 |
| Customer B | Related party transactions | 79,477,061.26 | 1-2 years | 19.37 | 3,973,853.06 |
| Customer C | Related party transactions | 73,664,670.11 | Within 1 year | 17.95 | 3,683,233.51 |
| Customer D | Related party transactions | 44,441,872.51 | From within 1 year to over 3 years | 10.83 | 44,441,872.51 |
| Customer E | Related party transactions | 33,000,000.00 | Within 1 year | 8.04 | 1,650,000.00 |
| Total | / | 319,173,803.88 | / | 77.78 | 58,178,469.08 |
G. Receivables involving government grantsNot applicable
H. Other receivables derecognized due to the transfer of financial assetsNot applicable.
I. Amount of assets and liabilities transferred from other receivables and continue to be involvedNot applicable.
(3) Long-term equity investments
| Item | Ending Balance | Beginning Balance | ||||
| Book balance | Provision for impairment | Book value | Book balance | Provision for impairment | Book value | |
| Investment in subsidiaries | 851,111,221.03 | 5,500,000.00 | 845,611,221.03 | 801,448,021.03 | 5,500,000.00 | 795,948,021.03 |
| Total | 851,111,221.03 | 5,500,000.00 | 845,611,221.03 | 801,448,021.03 | 5,500,000.00 | 795,948,021.03 |
A. Investment in subsidiaries
| Name | Beginning balance | Increase in current period | Decrease in current period | Ending balance | Provision for impairment provided in current period | Ending balance of provision for impairment |
| DAP (Shanghai) Co., Ltd. | 59,046,675.86 | 59,046,675.86 | ||||
| Shanghai Shanggong Butterfly Sewing Machines Co., Ltd | 79,000,000.00 | 79,000,000.00 | ||||
| Duerkopp Adler AG | 142,370,693.64 | 142,370,693.64 | ||||
| Shanghai SMPIC Imp. & Exp. Co., Ltd. | 12,000,000.00 | 12,000,000.00 | ||||
| Shanghai SGSB Asset Management Co., Ltd. | 60,000,000.00 | 60,000,000.00 | 5,000,000.00 | |||
| Shanghai SGSB Electronics Co., Ltd | 20,000,000.00 | 20,000,000.00 | ||||
| Shanghai Fengjian Property Co., Ltd. | 500,000.00 | 500,000.00 | 500,000.00 | |||
| Shanghai Shensy Enterprise Development Co., Ltd. | 86,083,077.64 | 30,163,200.00 | 116,246,277.64 | |||
| Zhejiang ShangGong GEMSY CO., LTD. | 129,600,000.00 | 129,600,000.00 | ||||
| Shanghai ShangGong Financial Leasing Co.,Ltd. | 33,452,430.00 | 33,452,430.00 | ||||
| PFAFF Industrial Sewing Machine (Zhangjiagang) Co., Ltd. | 12,553,070.89 | 12,553,070.89 | ||||
| DAP Vietnam Co., Ltd. | 204,273.00 | 204,273.00 | ||||
| ShangGong Sewing Equipment (Zhejiang) Co., Ltd. | 10,000,000.00 | 10,000,000.00 | ||||
| Dürkopp Adler Industrial Manufacturing (Shanghai) Co., Ltd. | 20,000,000.00 | 20,000,000.00 | ||||
| TIANJIN RICHPEACE AI CO., LIMITED | 136,637,800.00 | 19,500,000.00 | 156,137,800.00 | |||
| Total | 801,448,021.03 | 49,663,200.00 | 851,111,221.03 | 5,500,000.00 |
(4) Operating Income and Operating Costs
| Item | Six months ended June 30, 2019 | Six months ended June 30, 2018 | ||
| Income | Cost | Income | Cost | |
| Main Business | 157,741,349.49 | 115,259,551.04 | 161,971,986.03 | 119,608,864.69 |
| Other Business | 21,719,871.18 | 5,974,128.57 | 22,840,519.23 | 5,821,241.27 |
| Total | 179,461,220.67 | 121,233,679.61 | 184,812,505.26 | 125,430,105.96 |
(5) Investment Income
| Item | Six months ended June 30, 2019 | Six months ended June 30, 2018 |
| Long-term equity investments measured under equity method | ||
| Investment income from disposal of long-term equity investment | ||
| Investment income of a financial asset at its fair value and whose changes are included in the current profits and losses during the period of holding | ||
| Investment income obtained from the disposal of financial assets at fair value and their changes are included in the current profits and losses | 26,338.67 | |
| Investment income of the held-to-maturity investment during the holding period | ||
| Investment income obtained from the disposal of the held-to-maturity |
| Item | Six months ended June 30, 2019 | Six months ended June 30, 2018 |
| investment | ||
| Investment income derived from available-for-sale financial assets | ||
| Investment income from disposal of available-for-sale financial assets | 11,889,784.50 | |
| Investment income of transactional financial assets during the holding period | 1,555,711.20 | |
| Dividend income from other equity instruments invested during the holding period | 900,000.00 | |
| Interest income earned by the debt investment during the holding period | ||
| Interest income earned by other debt investments during the holding period | ||
| Investment income from disposal of transactional financial assets | 59,257.62 | |
| Investment income from disposal of other equity instruments | ||
| Investment income from disposal of debt investment | ||
| Investment income from disposal of other debt investments | ||
| Others | 2,572,557.48 | 6,935,894.29 |
| Total | 5,087,526.30 | 18,852,017.46 |
18. Supplementary Information
(1) Extraordinary profit or loss for current period
| Item | Amount | Note |
| Profits or losses from disposal of non-current assets | -54,610.64 | |
| Tax returns, deduction and exemption approved beyond the authority or without official approval documents | ||
| Government grants included in current profits and losses (except for government grants closely related to the enterprise business, obtained by quota or quantity at unified state standards) | 8,334,412.90 | |
| Payment for use of state funds received from non-financial institutions recorded in current profits and losses | ||
| Gains from the difference between the investment costs of acquisition of subsidiaries, associates and joint ventures and share in the net fair value of the identifiable assets of the investee when investing | ||
| Gains or losses from non-monetary asset exchange | ||
| Gains or losses from entrusting the investments or management of asset | ||
| Impairment provision for force majeure such as natural calamities | ||
| Gains or losses from debt restructuring | ||
| Restructure expenses, such as the compensation for employee relocation and integration costs | ||
| Gains or losses from transactions with obvious unfair transaction price | ||
| Year-to-date net profits or losses of subsidiaries arising from business combinations under common control | ||
| Profits or losses arising from contingencies not related to the company’s normal business | ||
| Except for effective hedging business related to the normal business of the company, profits or losses from fair value changes in held-for-trading financial assets and held-for-trading financial liabilities, and investment income from disposal of held-for-trading financial assets, held-for-trading financial liabilities and available-for-sale financial assets | 30,368,799.38 | |
| Reversal of the impairment provision for receivables subject to separate impairment test | ||
| Profits or losses from entrusted loans | ||
| Profits or losses from fair value changes in investment property subsequently calculated with the fair value mode | ||
| Impacts of one-time adjusting the current profits or losses in accordance with requirements of tax and accounting laws and regulations on the current profits and losses | ||
| Custodian income from entrusted management | ||
| Other non-operating income and expenditure except for the above items | 1,036,392.23 | |
| Other profits or losses which can be deemed as non-recurring profits or losses | ||
| Income tax effects | -10,941,096.15 | |
| Minority interest effects | -1,819,359.73 | |
| Total | 26,924,537.99 |
(2) Return on Equity and Earnings Per Share
| Profit in Report Period | Weighted average return on equity (%) | Earnings per share | |
| Basic earnings per share | Diluted earnings per share | ||
| Net profit attributable to common shareholders of the company | 3.1427 | 0.1288 | 0.1288 |
| Net profit attributable to common shareholders of the company after deducting non-recurring gains and losses | 1.9451 | 0.0797 | 0.0797 |
(3) Differences in Accounting Data under Domestic and Overseas Accounting StandardsNot applicable.
Chapter 11 Documents for Reference
1. Financial Statements signed by the legal representative, chief accountant andaccounting manager and sealed by the Company.
2. Original documentation and announcements published by the Company in thenewspaper appointed by CSRC within the report period.
Shang Gong Group Co., Ltd.Chairman of the Board: Zhang Min
August 29, 2019